I really feel for you. I think you can possibly get the result you wish for in this situation by doing the following...
Tell MIL you will happily pay her back the £400 and can do so in instalments.
I say do NOT pay it back in a lump sum. Pay it back at £36.00 a month. She doesn't need to have it back in one lump - she's not on her uppers going by info you've given.
That is 10 payments at £36 and 11th/final payment of £40.
£36.00 is a sum that smacks of being a considered and budgeted amount. Not an arbitrary sum like, say, £40 might sound.
This will do the following:
It will reinforce the fact that you budget/ have to consider your spending. You've given up things like council gym membership and no doubt other things too to achieve a relatively modest and reasonable dream!
You had earned the right to buy your camper van. You haven't been profligate - you seized the moment.
Each time you or DH hand her the £36 - and I say pay actual CASH not faff about with a bank transfer - you (without having to say any words) make a point of reminding her it's a repayment for loan/car - the gift that never was!
Bank transfers are silent - no witnesses - have no element of 'ceremony' about them and allow the matter to be swept under the rug!
The best thing about repayment in cash over 11 months is that her taking this 'magnificent' sum off you each month will be a regular and unavoidable reminder of this 'gift which wasn't a gift' for the better part of a year!!
Plenty of time for her to 'reflect' on things.
I think if the money was always handed over monthly and never a day overdue - even if a special trip over to MIL's house was required to ensure this - and if the handing over date coincided with a day when your DH was ferrying MIL around absolutely gratis, even better!
You might find MIL decides she doesn't need you to pay her back after all!
You might as well get a little wry enjoyment from this situation.