I haven't read through all the replies, sorry if this is a repeat, but the time to really have said something was immediately after MIL voluntold you to pay. I would have laughed out loud, and said, "Oh, MIL, you are funny! DH is a full-time student and we live with my parents! We could never afford such a thing! Wish we could, though! Just as soon as we win the lotto! (more laughter)" You could follow up by saying, why don't you all come to our house for dinner, that way you can meet my parents? Or, why don't we go to X restaurant, that'll be just as good and less expensive for everyone. (or whatever else you would prefer to do). Since your DH has a history of steamrolling you in favor of his mother's wishes, this strategy would not have given him the opportunity to acquiesce.
At this point, you might call her directly, circumventing your husband to "confide" in her. "MIL, I know that DH said that we could pay for the "Big Dinner Out," because he loves you and wants to please you. However, I have to tell you that our finances do not put us in a position to really afford such a place. IF we pay for this dinner, we won't be able to afford our cell phone bill (or what have you). You've put us in a difficult position, and I wondered if you could help get us out of it?" Enroll her into being your ally instead of your opponent. This would only work if you have a pretty good relationship as it is, and that given all the facts she would not want to really harm you in this way.