yes. If your MIL doesn't want to dine with the family who live in her house, then that's okay. she can eat at home. The peace might be good for her. ahhhhhhhhhh . . . .On the other hand, you should not let her tantrum and anger rule your home. So if you want to invite the whole family, by all means, do so.
We have had crowds at Tgiving and we've had it with just our family. And we HATE if with just our nuclear family. It is so much more fun when you have lots of company, or are at someone's home with lots of company. so go for it !
In your own house, you make the rules and you make the invitation list. Be polite to your MIL, but don't let her get away with ruling your household.
and maybe there's a way your BIL and his daughter can move out, because it doesn't sound like a positive environment within which to raise a child. IF he need $$, there's housing assistance and food stamps and all that stuff. but why is the granddaughter's bf living there, too ? I think Mom swallowed more than she can chew, and she'd probably like to have her house back to herself, but doesn't know how to stand up for herself and do it in a positive way, so it's coming out in nasty ways.