So rest assured you are not wrong in these conditions. But it sounds like that isn't the real issue here.
You are correct. She is using "its rude" as an excuse. What she really wants is to be able to throw a party where she gets to control the guest list so things can be done "properly. She also asserts that the other party by its very nature is "rude"
Her hosted shower is going to be very traditional, and have her friends and my MIL friends who are mostly older ladies. It will be at a nice resturant, have cutesy shower games, and will involve the standard opening of gifts to ooo-ing and ahhh--ing. We're looking at aroung 15 people including myself. For some reason she thinks this is "too small"
The other party is for my wider circle of friends. It will be a house party (she has an amazing and huge house & backyard, and we live in that area of the US that is currently refusing to acknowledge December ;-) ), men will be invited, games will probably consist of things like "Let's all take a shot because TeraNova can't," and while I will likely sit and open gifts there if people want me to, if they're rather just hang out and have a good time I'm cool with that, I'll send them Thanks Yous later. Its very different mindset and a lot more casual. This party will likely have 30-40 people there.
The 2 groups are very incompatable. Either my friends will need to feel like they have to "be on their best behavior" or the older ladies will be horrified by my friends' antics. Regardless the 1st thing Mom would do if she were in charge is want to get rid of the males from the guest list (once again under the grounds that anything not traditional is "rude") and I find this utterly unacceptable considering that 1) DH gets to part of the Friend Shower festivties, YAY! and 2) Most of my friends are actually male.
I had hoped by shower splitting I could avoid drama but she seems to be intent on making up reasons to be offended. Even Dad and Sister can't figure out what her issue is.
But thank you all, I just wanted to be certain I wasn't wrong in my initial train of thought.