Congratulations on your new baby.
When my children were babies three out of four grandparents and one uncle were heavy smokers. I mean chain smokers very often, or rarely going more than 5 minutes (10 at most) without a cigarette or pipe.
There was only so far any of them were prepared to compromise, and changing tops would not have been on their agenda. When at our house all of them always smoked outside, never inside. No-one who was smoking actually held the baby, though stopping older children from following grandma/grandad outside to chat to them when they were having a smoke was not possible.
When we were visiting DH's parents house, his mum and brother were the smokers there. They usually tended to smoke outside as MIL fretted about the damage it would do to the decor and paintwork.
My parents never would have been that flexible. They smoke in their living room, kitchen and bedroom (though not in the guest bedrooms). The result was them visiting us more than the other way around, and we often only saw them three or four times a year for a night or two (with kids usually either being taken for a walk or asleep in separate rooms).
None of them would ever have agreed to the changing of top idea. If I had gone for that one then my children would never have known any of their wider family. I must say though, they seem to have survived unscathed, and are now healthy 19, 16 and 12 year olds.
Your house, your baby, your rules though. I think it is fair enough. I am not a smoker, though I did grow up with a pair of very stubborn ones. They are actually lovely people, and are caring and very generous. I do love them to bits, although the smoking has caused the odd issue. My kids are older now obviously, and tend to go off and do their own thing, so it is no longer the issue it was when they were babies with little choice but to be wherever they were put.