YANBU to stop someone with clothes/hair all impregnated with smoke holding your baby.
YABU if you haven't told your mum why - it's quite possible that she believes smoking outside is enough - if you don't explain to her she can't work with you to reach a point you'd be happy for her to hold him.
Would it be possible to go shopping with her for a special cuddle top (or two) that live in your house and go through your washing machine (even if she put on one of her 'clean' tops, chances are it's already 'smokey'), and make it clear that she can have 'cuddle time' - so long as she hasn't smoked for 2hrs before, has showered and changed into the cuddle top - also is her hair long enough to tie back?
I wouldn't suggest she hold him first thing in the morning, all the smokers I know are desperate for a cigarette when they wake up, and most of them cough a bit too - I wouldn't want them coughing all over DS
At the same time I'd be gently making it clear that DS wouldn't be visiting any house that has a smoker resident - including but not just hers.
[Personally I don't think vaping is any better! excluding prescribed medication, I don't think we should be inhaling substances in this fashion - I can understand it as a stepping stone to quit smoking, but I know too many who have switched to and continue to vape, and I also know a surprising number of younger people who have never smoked a cigarette, but are addicted to vaping the sweet/fruity rubbish. I fully expect in 20ish yrs time we're going to 'discover' that vaping is also really fucking bad for you.]