I DD'd the MIL post. I really appreciate everyone's advice. Hell, there should be a medal just for reading that entire post!
DH's aunt (on his dad's side) came over to the apt today to see the baby and started asking about things with MIL. She told us that MIL had called her to let her know what an evil person I was and that was manipulating DH to keep A from her. We can understand her talking about it to BIL. We don't agree with him getting involved or upset, but we understand how it could happen. To call extended family members and complain about us - that's crossing another line. It's like the mother/daughter marriage advice - Don't tell me about your fights because after you go to bed and make up, I'm still angry.
Even if we try to talk things out, we don't know how many other people she's told about all of this or what she has told them. So, we have decided to cut ties. By talking to everyone but us, she has shown that she has no interest in resolving the issues and we would rather just walk away knowing we tried than play games right now.
Re: DD