While I agree with those that say that someone that doesn't want their picture taken shouldn't complain about not being in a photo album, I do think that those that made the album could have at least reached out to her and said "we're making an album about the baby and giving it to the whole family. Everyone is in it but you. Do you have a picture of you'd like us to include?" Granted, that wasn't the plan when they took the pictures, but once they decided to do it, I don't think it would have been so bad to just mention it to her so that she's not left out.
A photo album on your coffee table with pictures from your family vacation that don't include SM, is one thing. But an album, given as a gift to all grandparents that don't include one of the grandparents receiving the gift, does seem off. The purpose of the "gift" I think would be for the grandparents to have a momento of their first moments with the baby. But the SM was given a gift that she can't really use for that purpose. Even if it stemmed from her not wanting her picture taken, I do think that the LW could have asked her for something to include (I would not have made a special trip to take a specific picture after the fact).