I think to me it just sounds like you MIL is too involved. Cut the apron strings a bit and don't have her as part of every day life - there's a reason people move out and start their own lives. Seriously a mother in law/grandma should be on a once a week schedule at most I think. Especially when you live nearby. Its tempting to utilize the help, but independence is better. Cut back on MIL/grandma time and take control over your lives as independent and separate from hers. Work on your own nest so it strong and well established for when you need it most.
I grew up just a few miles from my grandparents. And they were super involved - came to see me in the parades, we spent every holiday with them, grandpa did handiwork at our house, if I or my brother was sick and my mom had work, we'd go there. We had toothbrushes at their house - that's how involved we were. I think we called every night to say goodnight. It was close.
But day to day life was my parents. Grandma and grandpa were there for anything remotely big, or in any bind, but they weren't in the foreground most of the time. And really, I think it worked out well. I grew up to be very close to my grandparents. And I have a very warm and healthy relationship with my parents. And they are totally different sets of people in my mind.
SBF - who do you want to think raised your kid? Like years from now, when your MIL passes, at her wake do you want to overhear your daughter say "she was like a second mom to me, she practically raised me, I always remember her being there" or would you rather hear "she was such a good grandma, whenever I had something important she was there rooting me on, and all my holidays, she was always happy to see me..."
You get to define the perimeters people have in your child's life, its part of your job as a parent. And sometimes, less is more. Less seeing grandma in everyday life, and make more of a big deal for special occasions.