This should have been discussed before the holiday was arranged. SIL will be getting a holiday out of it too so she's being bloody cheeky to expect you to be paying a substantial amount more than the cost of a birthday present without discussing it before it was arranged. When my mum has had a big birthday, DSis and I have either gone for a weekend away abroad with her to celebrate (we just all paid for each other I think, she was way more well off than either of us at the time), or for her latest one, we paid for a cottage for a weekend away at which all her female relatives came.
I've had similar requests before, OP. DH's brother's wife booked them a weekend away as a "graduation present" to DH's brother (big bloody graduation present!!!!). We knew nothing about it until she texted DH and his other brothers suggesting they pay for a "his 'n' hers" massage as she "wanted to treat DH, he has worked so hard". It took me and the other relatives all our strength to not text back "If it's YOUR treat, YOU treat him!!!" It was not his first graduation either so no big deal really. Our usual graduation thing is to text whoever it is "congratulations!" when a relative graduates, maybe send a card if a close relative, and buy them a congratulatory drink when we saw them. We would not usually buy a present (why?!?) and certainly wouldn't be wanting to cover someone else's "treat" to their spouse, especially when she was a bloody massage therapist herself!!! 
It makes me laugh even now, the gall of her. We were having house renovations done at the time and every spare money was going on that. We did NOT give her money, and we told her why. Funnily enough she is now DBIL's ex-wife (other reasons - even worse....)
We also had similar years back when we were really really skint. It was FIL's big birthday, and DH's older brother (in well paid job, annual bonus etc) texted his brothers to say that he knew their dad had always wanted this one particular type of watch, so could they split the cost equally between them. We really couldn't afford it at the time but DH was too proud to say that actuallly we couldn't afford it. We went quite a way into our overdraft and it took us a long time to pay off. That was a difficult one. I knew DH didn't want to lose face and say he couldn't do it so I just went along with it. But it did remind me to never ever assume in my life with anyone else that they can just afford to split something equally.
If I were you, I would see if DH would ask his mum if there is anything she would like for her birthday? It's very presumptuous of SIL to assume there's nothing she would like. If not, then I would do as others suggest and either give her some spending money for the hol and tell her to go out to a luxury restaurant (then it's up to her whether she uses the money to pay for SILs share, or just pay for her own), or pay for a trip or something.
To suggest she subs the joint trip - SIL is a total CF.