Totally agree, it's not giving in, it's keeping the peace. And is the genuinely mature thing to do.
Look, OP, the thing is that in NO WAY does 'giving in' on the fruitcake mean that's it, the door's slammer shut, you are then never allowed to push back against your MIL for the rest of your life. For those who are saying, effectively, 'give in on this now and you'll never have a leg to stand on with her again, she'll get the message you're a pushover and will then without any doubt ride absolutely roughshod over you for the rest of her life'... I just don't think that's true!
At ANY point in your future, be it over your future children, be it over where you choose to live, be it over the cake you choose to make for your husband's 40th - whatever matter, however massive or trivial - YOU CAN STILL PUSH BACK, EVEN IF YOU DIDN'T PUSH BACK OVER THE FRUITCAKE.
There's an argument for suggesting that if you DON'T push back over something relatively trivial (the fruitcake) you have EVEN MORE power to push back over something that really does matter (aka picking your battles).
And even if that isn't true, even if it categorically makes it harder to push back when she's got the sense you will just roll over - even if it's harder, it makes it IN NO WAY IMPOSSIBLE.
You can tell her, nicely or otherwise, to butt out at any time in the future. I promise you, you can.
I have a friend with exactly your type of well-meaning but bulldozing MIL and my friend gives way a huge amount - for a quiet life. One occasion recently, MIL pushed things too far (something to do with the kids) and my friend absolutely erupted (unlike her) and laid it on the line that she'd had enough. It has worked. Her MIL has got the message. It was only once, and after 8+ years of marriage, but it worked.
Not suggesting you need to wait this long. But if your MIL is as pushy as you say, there will very soon come another opportunity to push back against her, and it will probably be one that matters much more. You have in no way lost the slightest iota of legitimacy by letting her get her way now.