Since your SMIL doesn't listen to your reasons for not issuing the invitations she wants, stop giving them to her. The next time she makes an inappropriate request, say, "Sorry, we aren't doing that" and let it go at that.
If she wants to invite these people, she can invite them to her own home. She has no business telling you whom to invite to your home. You and your DH are adults and can make that decision for yourselves.