I remember the previous posts about the SIL and while it was beyond horrible what happened to her, I remember thinking that her behaviour was still a bit much (long, public, raging tantrums at events she organised over things that were very innocent)
However, I don't think that really has a bearing on this event. You can't request that Christmas not be altered because it will be, but you can choose how to respond (and whether to attend).
How long do they get to alter Christmas for, for the rest of their family? Does the rest of the family never get to have a "normal" Christmas again because of this part of the family's tragedies? I think the OP has been more than giving, and sympathetic...but she and her family need to have normalcy return - she not wrong or unfeeling because they are at differing stages than the SIL. ( not that you, personally are saying that she but some of the posts in this thread have been harsh towards the OP). One can only live in crisis mode for so long.
The OP and her DH already had their Christmas just the way they wanted it already. This is a post Christmas gift exchange with 6 people, 4 of whom are the family with the sick baby, and the other two are the grandmother and aunt of the baby. Quite frankly, if the OP wasn't willling to accommodate the sick baby she would probably find herself without any guests.
Anthera, a couple of times in this thread, you've mentioned that I got to have Christmas "just the way I wanted it". I wish you wouldn't assume this. I spent Christmas with my family, this year, true. It was not the way I wanted it to be. I posted one of the funnier bits of horribleness in the "Special Snowflake" thread. My uncle was arrested on Christmas Eve, my father's Alzheimer's has deteriorated to the point where he occasionally doesn't know who I am or who my DH is (that was a fun discovery on Christmas Eve), my grandfather has lost the use of one of his hands over the past few weeks (at least he was home and not on a day pass from the hospital the way it was the previous three times I was home)...if that sounds like a Christmas "just the way I wanted it", then you're made of stronger stuff than I am.
This party was going to be Christmas the way I wanted it; to be with family, to create, prepare and serve a meal that people would enjoy, to give gifts that I thought would be meaningful and appreciated. I'll go along with the new plans, and my IL's won't know how hurt I am by what's happened. It still won't be Christmas "the way I wanted it to be".
I'm sorry that you had such a bad Christmas. By saying you had Christmas just the way you wanted it, I was not commenting on what happened with your family, but that you were able to spend Christmas with your natal family and that your SIL did not attempt to alter or control your holiday.
I've looked at some of the other threads about your SIL and the underlying problem here is that you see your SIL as a spolit "golden child". "SIL gets her way in everything in this family." Your MIL will cancel plans with the rest of the family if SIL can't attend. Its very hurtful to see your efforts and your DH marginalized. From what you've written I imagine that if all three of MIL's children were drowning and she only had two life preservers it sounds like she'd throw both to SIL1.
Also in a previous thread you stated that she "She's always gotten whatever she wanted/needed, whether it was high grades, marrying the "right kind" of guy, buying a house in the "right" neighborhood, etc. " So I'm sensing that the family culture may also be that SIL is considered to have made more "right" choices or have more "right" things than you and DH.
Because you see her as an entitled brat, any reasonable requests she makes may seem to you as just additional manipulations. In this instance, she requested that the gift exchange be held at her house. Her infant had just come home from a month long stay in the hospital. She also has a toddler. Quite frankly, it would be exhausting to just watch a two year old at a non childproofed home. Its not unreasonable for her to make this request. She only made the request after her baby became sick. Before that she was willing to come to your house. Of course, you both know that if you don't agree that the entire event will be cancelled. SIL may not care at all if its cancelled. She's more concerned with her children. You care because you had been looking forward to hosting and also to a nice gift exchange and had spent considerable time selecting presents. She awkwardly offers to let you host in her home, it comes out wrong and you are miffed "your home isn't good enough to set foot in, but we want you to cook for us because we like your food".
Her wanting to have the gift exchange at her house is about her needs (not taking sick baby outside, child proofing, access to cribs if the babies fall asleep, changing tables, etc). But you are feeling it as a "slap in the face". You feel "our house isn't good enough for her children..." You both have the right to want what you want, but she has far more power than you in her family.
The truth is many families will bend over backwards to help out the members with very young children or health issues. I think your DH's family will also brnd over backwards to accommodate your SIL whether she needs it or not. You are frustrated by her special treatment. But there is nothing you can do to change how your ILs treat her. All you can do is either stand your ground or give way. In this instance, you very correctly gave way. That doesn't mean you have to do it the next time. Or the time after. And it certainly doesn't mean you ever have to like it.
I'm going to suggest that next year you come up with some really fun activity (decorating cookies? Movie and lunch ? Ice skating and hot cocoa?) that you and DH could do with niece1. Tell SIL that you wanted to give her a break (ie she is NOT invited) Make it so much fun that MIL begs to be included. Add niece2 when she gets older. This could become your Christmas tradition that SIL wouldn't be able to touch("We wanted you to have a chance to go Christmas shopping/get a manicure/groom the cat"). I might just start going on vacation every other Christmas, because as SIL's kids get older and if there aren't any other grandchildren the holidays will become more and more SIL centric with your ILs.