If a gift arrives, you can either dump it or return it. If you're worried about FIL gossiping with other family members about how rude you are not to send a thank-you note, then returning the gift is the best option as it frees you from any thank-you note obligations.
Well, if you are worried about him complaining about the thank-you note, I would think that the family fallout from sending the gift back unopened, "return to sender," would REALLY give him something to complain about.
Something that would probably not be acceptable to other family members.
They'd be more likely to forgive you for not writing a note, but they aren't going to be willing to understand why you'd so dramatically and hurtfully turn your back on your own father(-in-law).
Not that I'm saying you should retain ties, etc., etc.--I just don't want you to send the package back without realizing that it is a MUCH bigger and much more REAL risk, in terms of "family P.R.", than no thank-you note.
My vote would be to minimize drama at every turn. Sending him a cursory thank-you note and donating the gift is the low-drama option.
You can be Teflon instead of a black hole. If you always choose the path that is the least involved and creates the least conversation--with others and **between the two of you**--you'll probably be happier.
So, gift comes?
Option A: Write a rote thank-you note, donate gift, move on. Total time spent: 20 mins.
Option B: Write "return to sender" on box, drop at post office. Listen to brother, sister, aunt, uncle tell you how FIL and SMIL told them, and how they think you're rude, and he's your FATHER, yadda yadda yadda. Total time spent: 20 mins. plus 2 hours of them talking, plus 2 hours of the two of you talking at home in an effort to detox.
My vote: option A.
Just do a fade-out.
If FIL calls, say: "Sorry, Dad, I'm in the middle of something, I can't stay on the phone--is there something specific? No, OK, Sorry, I've got to go. Bye." <click>
(Also make a pact with each other: If you choose the Teflon route, then NO TALKING BETWEEN YOURSELVES about it, because that destroys the non-stick coating, sort of like a metal utensil on Teflon.)
Your goal--am I right?--is to eliminate the potential for hurt, and to allow yourselves time to heal from the current bruising. Further drama is not going to do that.
The other advantage of the fade-out--of being Teflon--instead of the declared break:
It preserves options for the future.
Because, seriously, making a *permanent* break from your father is a big, honking deal.