Well, as others have said, no to sending kids to school in clothes that smell - it isn't fair (that swampy undried laundry smell is really quite nasty). But as someone who has fought a battle with stored bed sheets that got that smell, I do sympathise, and there is good anti-stinky laundry advice here.
Otherwise - why tf is your mil having this conversation with her son? is he just relaying information on to you, as if it is nothing to do with him? Or is he actually stirring (how does you Mil know what your ds's school pants look like? he doesn't wear them over his trousers, does he?)
this sounds like it is about you and your husband having clear firm conversations about what is going to be done around the house, and who will do it (you both work, right?). You both need to pull your weight, and he needs to support you, not his MiL. fwiw, I think before you lock horns with anyone else about housework, esp if they are criticising you, you might spend a little time being totally clear in your own mind what your attitude towards housework etc is, and what you genuinely want to see in your own home. you talk about 'cupcakes' and say a 'clean house is the sign of a wasted life'. But not wanting to bake cupcakes is different from sending a kid out in clothes that smell, to be blunt. And I'm the main breadwinner in our family, and not what I would call houseproud, but I do want things to be fairly clean. Squalor and filth isn't a sign of virtue afaik (I'm not saying your house is squalorous or filthy btw).
If you are feeling overwhelmed and resentful about having to do work around the house, them you can be honest about that and think of solutions (get dp to do more, get a cleaner if you can afford one). It doesn't sound to me as if you genuinely don't care what your house is like - it sounds more like you know you'd like things a bit better, which makes it all the more irritating when your mil butts in with her opinions.
And again I sympathise. I am the chief breadwinner, I don't see it as my job to do the most work around the house, or do things 'for' my able bodied adult partner. I will do my half. That is fair. But my mil still comments on house things as if they were solely my responsibility, and has a tendency to see her son doing anything at all (like grocery shopping or washing) as him doing 'so much.' It's a generational thing - I think it is at the heart of much conflict with MiLs everywhere.