I am absolutely not suggesting that your MIL is right here by any stretch of the imagination but it seems to me that things are not quite as they may seem.
Clearly FIL knows what the problem is but doesn't want to say, which is fine but when your DH put him on the spot asking what was going on with DM he said nothing was wrong "your mom just wants mom and son time with you"
From what you have told us... "she hasnt seen him, hasn’t spoke to him over the phone or over messages in over a year" ... so MIL has at no time asked your DH to meet or replied to any of his numerous requests to meet and then not shown up.
"UPDATE - dp did drop in after she asked for mom and son time, he got there & she wasn’t home" - but she didn't ask for mom and son time - FIL suggested she did!
"Mom & son time is a sugarcoated way of saying ‘I want to see you but I don’t want the extra baggage like your partner and child" - but again she didn't say she wanted to see him, FIL did.
"Just because she may not feel like seeing her grandson, doesn’t mean she has to ban her husband from seeing him too" - but did she? Or did FIL ask you not to post about his visit on FB?
"No right to ban her husband from seeing his son & grandson" - You are clearly upset, I would be too if I didn't know why she was doing this but you are twisting the narrative here and that can be hugely damaging if there is something else at play that you don't know about.
"Dp went over soon as she said she wanted to talk to him days ago, they weren’t home" - she didn't say she wanted to talk to him,FIL did.
It seems to me that something has happened that maybe you are not aware of. You and MIL rubbed along ok and (I think you said) this happened suddenly. It looks like MIL has a problem with both you and your DH and FIL is trying, in the worst way possible, to get MIL and your DH to talk.
FIL arranges a BBQ and it looks like she told him she wouldn't be attending, ruining his cunning plan for peace talks so he calls you and cancels.
Was the day she told you she was ill (when you think she was lying and was actually hungover) the last time you heard from her?
As I said, I'm not excusing MIL but maybe you need to be mindful that what FIL is saying is not necessarily what MIL is doing/saying. I really do hope you get to the bottom of it and it all works out for everyone.