If your hubby wants to get something for his brother, then let him get something. Remember, gift-giving benefits both the giver and the recipient. If doing something nice for his brother will give your husband joy, I think that's reason enough to let him.
Re: the bolded, if this were my husband, he would be wanting to get a gift not b/c it brought him joy, but because it was 'expected' of him, and he would be more afraid of how it would look to others if he didn't get a gift. Of course he would never admit that, but I've seen that type of thing a lot in his family (of origin) dynamic, and dealings with his friends. He always thinks that HE has to be the one to go along with what everyone else wants/expects, even if it doesn't necessarily make sense and even if it might inconvenience us. Even if nobody shows that same kind of consideration for him/us.
If he's adamant about this, I would (personally) offer to buy the present, and have it be a little token something, like maybe a gadget of some type (I'd worry about my DH going overboard). Or, since you said you'd be able to cook something, could you maybe give him a healthy serving of some baked goods that you know he likes? Maybe stress when you give it to him that you know he loves these SuperDelicious cookies, so you made some just for him for his birthday, and he should be sure to hide them so he can keep them all for himself. That way you're still making something, but you're not outright buying him a birthday present, and you don't show up emptyhanded, which is what your DH wants to avoid, if I'm guessing right.
I get the reciprocity thing....it really would have been nice if they'd at least brought a card to your hubby's birthday last year. They kind of set a precedent by coming to your DH's party emptyhanded. And a lot of times on this board, I've seen the advice to not give the present, and then if questioned, just say in a puzzled tone "Oh, I thought we weren't exchanging presents for birthdays anymore."
Like I said, I'm just going by what I would do if this was me/my DH. Feel free to ignore if your situation is different.