I'm torn where I stand on this - tbh not sure there is a right answer.
Your MIL definitely has issues, but given that it's not targeted at you specifically I would have a snigger with the other in-laws.
My mother would probably pull something like this, she hates my DH, where it used to be hidden it is slowly bubbling up to the surface! However my DBro doesn't have kids so any family pic would only exclude DH. She said way before I had kids if I had a girl then she, my Nan and said GDD would have a photo together, I have 2 DSs
. I understand more with that perspective as it's 'the female line' and conversly on my DH's side we have a few pics of 4 generations of males - DHs Granddad, Dad, two brothers and our 2 sons.
I am quite close to DH's family and think I would feel quite hurt if they suggested a DC and GDC only photo, excluding me and BIL, once you're married you are part of the family and a suggestion to do something like that implies you're not family enough for them. Like someone upthread said, without you, there's no DC!
OP - given she has form, don't sweat about it, see if your other in-laws are agreeing to it and silently sabotage, some good suggestions!