This is one of those threads when I think that MN can be slightly worrying.
The anecdote has very little context. The OP is asking the advice of people she doesn't know at all, don't know her, and have no direct experience of the context. What's more, MN has changed from being conversational, to somewhere that people post a fairly brief 'belief-statement', based on their own life experiences, rather than a more questioning, tentative 'maybe this, maybe that, could it be ...?' sort of response - which tends to lead to quite extreme, black/white responses.
Seriously, to those of you recommending OP reduces contact with her MiL over this rather flat-footed response - is that really a way to live your life with other people?
It's a very zero-sum way to live. People are not one-dimensional, nor are they easily split into two groups, 'good' and 'bad'. They are often capable of altruism, selfishness, a range of actions and thoughts that slide between these two extremes, being funny, being unkind, being on your side, not being on your side, being unintentionally cruel and kind, being intentionally cruel and kind - all within the space of a day.
Moreover, learning to negotiate with people, accept the variability and indeterminacy, work with virtues and flaws, live with the non-binariness of people (especially those with whom you are in intimate contact) is part of being a wholly rounded adult and fully-functioning human.
MiL is - let's be honest - very unlikely to be one of those people who actually maliciously reports OP to Social Services. It is very unlikely that she is actually planning to report OP and steal her baby. For a start, that behaviour would be indicative of an unstable personality - which is, for the majority of us, quite rare. To repeat, it is statistically rare. It really is. To read that into this OP is a. projecting a difficult situation in one's own life onto a completely incomparable situation b. utterly unhelpful to OP.
Counselling a decreased amount of contact with the MiL is perhaps not the wisest of counsel. And I would suggest it is a mis-reading of the OP's original post. Clearly, the OP has a relationship with MiL where she can call her, in the late evening, and expect MiL to help. That's quite a good relationship. It really is.
To over-read the second part of the OP - the joke bit and the OP's distress at the interpretation of the joke - is to miss a good bit of context. It really might not be the best course of action to go completely hard-core and over-focus on that, at the expense of the MiL's other actions (the willingess to be there for OP and grandchild).