I feel you girl. Here is the best thing to do. IF you do go because of TRADITION'S SAKE. YOU go in be your same old NICE AS PIE self or NICER! And show everyone, you are the bigger person. Take a small gift too "for the Hands that worked so hard" type of thing. Your Husband will be so proud of you.
Do NOT listen to this women, she is just trying to JUSTIFY her own actions and behavior by saying others feel the same way. She may have indeed being talking about you so others are NOT SURE what to think. SHOW them it is HER. By coming and being warm and friendly and helpful. EVEN if you are dying to say something DON'T!
Usually it has something to do with you having children from a privious relationship and them having to act as grandma to all.
Do not let her ruin your families holiday.
Maybe NEXT year have it at your house and invite her and the family and see who shows up. Then you and your husband can decide on future holidays together.
Make sure you let him know you are HURT she couldn't be woman enough to show up at your house next year if that is the case.
The more you and your husband talk the better. One day this woman will be gone and you will be rid of any problems, Don't have regrets. And don't let your husband be angry with you because you do not want to be a party to the holiday with the family, that will only cause big problems. If you act like NOTHING EVER HAPPENED, then SHE looks like the OGER (she sounds like)!
Hope this helps, been there and probably there on Christmas again. Be thankful your mother-in-law did not make you mis-carry your child as mine did to us to keep my husbands ex-wives indiscretions secret!(All came out in end due to her behavior.) The whole family heard stories about me too. And I showed up last christmas with gift in hand gave her a hug and laughed and smiled. The FAMILY was amazed as she sat away from us and made remarks about my niece who was born a week before my due date. My husband and I were/are still, both hurting and the family saw her true colors showing up after a 33 year absence, to be vindictive. I too have two children from a privious marriage, I heard the uncle, NOW dating my mother-in-law (they dated in early years also--maybe while married to my husbands father? She told me this BEFORE I EVER MET MY HUSBAND AS SHE AND I WORKED TOGETHER)say things about my children calling my husband DAD. Uncle was told to "SHUT UP & mind your own business that is up to Sam!", after my KEEPING MY CHIN UP so to speak- eloquent attitude toward the situation.
I even impressed my husband. MOST FAMILY IN MY COURT NOW!
At least the ones who count!
I give the Credit to the Lord for I alone could not pull that off, and I pray two years after the loss, and one year later I can do it again if need be.
Any Questions just ask, I can probably answer them.
Good Luck,your in my prayers.