I reckon that everybody over the age of 25 who still smokes has to have built up layers of defensive attitudes and blind spots that enable them to keep doing so. They know it's lethal; they know it's anti-social; they know other people judge them for it. So they retreat into denial, and take it very badly if anyone calls them on it (even indirectly, just by politely asking that they curb it in certain situations).
Actually, I have a friend who has taken this to extremes. Very nice woman, highly educated, artistic, committed community organiser - just the sort you think wouldn't smoke. But she does, as does her dp. She smoked throughout all her pregnancies, smoked around all her children despite two of them having asthma and chronic lung infections.
Is she ashamed of this? Not one bit. She is assertive, aggressive even, in her insistence that the anti-smoking lobby is a conspiracy to deny poor people their only pleasure, that there is no good evidence that smoking is bad for your health, that smoking in pregnancy can be beneficial. While I was pregnant she actually tried to persuade me to take up smoking!
Last time i visited her smog-filled house (I haven't been there since I had my own children) her dp was rolling up garden grasses into Rizlas for the dc, on the grounds that they might as well start learning some basic skills... When he saw my face, he told me very defensively that this would make it LESS likely their dc would smoke tobacco.
So I do feel for you, OP. I think it is very likely that your ILs will not react rationally to a reasonable request. And it is interesting that your dp is still smoking - ok only in the garden, but the chemicals will linger on his clothes... does he have any intention of quitting or is he on the defensive too?
This is going to be an ongoing issue through your children's childhoods, so I think you might as well establish your bottom line now and stick to it, even though it won't be pretty.