My Step FIL was in many ways the same. he had a long and complex medical history heart disease nearly killed him in hospital for months week sin intesive care, told to give up smoking, became unemployable as he worked on oil rigs, but miraculously got better, and started smoking again, 10 years later got bowel cancer, had an operation nearly died of peritonitous and speticaemia, spent months and months in hospital (after the smoking ban) many of which in intesive care, came home for a day while in a hospice and first thing he wanted to do was smoke , he hadn't at that stage had a cigarette for nearly 6 months, but it was what he wanted to do. Cue huge row, MIL distraught as she had by then nearly lost him twice.
He then had an operation to remove a leg, again months in hosptial, came out and immediately started smoking again. Then finally got lung cancer and died 18 months ago. Throughout all of this my MIL cared for him, and loved him, and he smoked like a chimney.
My DH was permanently angry about this, and the pressure it was putting on MIL, but FIL was an adult, and it was what he wanted to do. He had had a life of pain, some caused by the smoking, but he enjoyed it and he did not want to give it up. He must have borken the addiction when he was physically prevented form smoking for months, but that didn't matetr, he wanted to smoke, he enoyed smoking. He had precious little in his life, and for that reson if he said he enjoyed smoking I have to say I always thought it was his choice. He knew it would kill him (which it did) we knew it would kill him, MIl knew it would kill him. But he had nearly died 3 times before the lung cancer got him, and he believed he should be free to do what he wanted, and what he wanted, genuinely wanted was to smoke. I didn't approve, but it was his choice to make.
MIL has also since died, and one thing I have always been sure of, is that her life was much better for having step FIL in it, that she missed him terriby after he died, but that part of him was the fact he smoked and he would never ever have given up, and she would never ever have given him up. And she was happier for that, and I suspect step FIL was happier for smoking.
I have never smoked, I never will. DH doesn't smoke. We both hate smoking and everything about it. But I think YABU. Your MIL is an adult, you may not understand why she behaves as she does, it may be unfair, but its her choice, and I have no doubt she knows that it will kill her one day, just like it killed my Step FIL. It doesn't make her any less of a mother to your DH, nor does it mean she loves him any less.