I had no problem with anyone holding dd when she was small and offered her immediately to people like MIL who I knew was desperate for 'cuddles'.
However. When dd was 5 days (after trying to 'share' dd with mil as much as she wanted, we had been at MILs around an hour. I walked in, gave dd to MIL who kept her for around half an hour, even when she was screaming, eventually handing her back to dh when he insisted she needed a feed (EBF much to MILs disgust, same as your mil, unfair to her!) I left the room and fed her, PIL didn't like me to BF in front of them. When I came back in, holding a sleeping dd, mil charged over and grabbed her saying 'right giver her here, she wants a snuggle from her nana'. Hormones made me want to burst in to tears and I could have kicked myself for letting her do this to me! Later in the visit, we put dd in her coat yo go, mil announced she'd never seen this coat and wanted a photo of dd in it, again came and snatched her from my arms to pass her to BIL to take a photo as obviously, there was no way I could be in the picture.
This behaviour continued and worsened, my dh snapped with them and we now have no contact with them they haven't seen dd since she was 1, she's nearly 3 now.
Moral of the story is stick to your guns and set firm boundaries based on what you're comfortable with, if we had, we might not have got to the point of no contact, which is awful for everyone involved!