It's not just about second hand smoke, though. It's also about third hand smoke.
Here:
news.bbc.co.uk/1/hi/health/8503870.stm
More research does need to be done but I think that, in the meantime, it would be prudent to err on the side of caution. I am expecting DC2 soon and I have already explained to my sister and BIL that they will have to wash hands, clean teeth and wait for quite a while before holding DC. They are absolutely fine with it because they respect my decision and want to do what's best for DC. My step-grandmother's house is absolutely awful in terms of smoke smell - she smokes at least 20 a day. My mum, who has asthma, is affected very soon after she enters the house. For this reason, after birth of DC1 I invited SG to visit us at my mum's house, but wouldn't take baby round (was honest about why). I don't think I asked her to wash her hands though, but I would do this time (more confident second time round!)
And before anyone accuses me of being a smoker-basher - yes, I used to work for Macmillan Cancer Support, but I also used to smoke, before having DC1 (and did have a relapse last year :( So, I do understand what it's like to be addicted, how difficult it is to give up, etc.
OP, I don't think YABU at all. Just explain to DH, who can explain to MIL, that in light of the evidence currently available, these are the steps you'll be taking until further evidence suggests that you can stop taking these steps. Surely they both want what's best for your DC.
Congratulations btw, and good luck!