Wow. As I think you're well aware, OP, the problem here is more with the mother's extreme lack of etiquette and love of PA-ness than anything you're doing. If those gifts are age-appropriate, then I'd think that means you're probably fine, as a rule of thumb. If the mother really took umbrage last time, she probably should have taken you aside and spoken to you in a civil way, like an adult. Or just thanked you for the thought, not hollered the the entire room about how much she hated your gift, and made a mental note to send you a list of the girls' current interests so you'll choose something based upon them and less likely to be messy (if the interests listed are chosen well, which is easy enough).
I agree that it's not fair to punish the daughters for having a mother like that. I'd suggest trying, just one more time, with something guaranteed not to be messy, e.g. a book. If the mother still makes nasty comments at you, then the message is clear: the problem isn't the gifts, it's that she just doesn't like you. Then I'd just follow your husband's advice. Or maybe everyone will be happy if you stick to books, who knows?
If you choose to decline from giving gifts, that's also fine. I would have a script ready when people ask about it. Something along the lines of (but politer), "Oh, SIL let us know that she didn't like us giving them gifts, so we didn't want to burden them further." Her silly little PA remarks and talking loudly about you when you've barely left the room are absolutely her letting you know that she doesn't like the fact that you got them gifts. It's very unlikely that she didn't mean for you to be aware of this. Unless she is completely socially inept in all other areas of life as well and lacks a brain-mouth filter, but if that were the case and she was subsequently this bad with just about everyone about everything frequently, then I don't think she'd have been invited to a family christmas. IMO, she was sending you a very PA (and low, in my opinion) message. I wonder how awkward everyone else in the room felt when she did this.