I'm all for dogs doodle, my parents have an unruly terrier cross that still jumps up the first 5 minutes that anyone enters the house and tries to get to my babies feet and has knocked over my 4 year old, and we don't lock her away. However, while she is strong and bloodyminded, she's entirely without aggression (has scared many a postman by running up to them and licking them...) and while I'd never leave any dog unsupervised with a young child, I have no problem with her being in the same room (my 4 year old and her adore each other) with my kids (when we're there) and once she's calm we let her say 'hello' to the baby.
But, she's just a random mongrel terrier cross, average sized, has been brought up with kids (DS1 and her are the same age and grew up together) and doesn't have a jaw with the bite pressure of a rottie.
I think owning a big dog without having it fully trained is idiotic in the extreme, but that appears to the be the situation, and given that, the idea of having a boisterous, excitable, untrained rottweiller in the same room as a baby is just asking for trouble. Remember that MIL was complaining she can't control the dog way before the baby turned up.
If that dog decides to get jealous because granny or grandad are making a fuss of the baby, who's going to stop it? Who's going to pry it's jaws from the babies head? Will they manage it in time?
What you and giles are discussing is how, in an ideal world, dogs and babies/children should be with each other, and I agree, but in this case, you have 2 people with a powerful dog that they can't control which will be a potential danger to their grandchild for many many years to come, if they can't control the dog without a baby in the room, what chance is there of them managing to do with a baby there? Would you risk your child? I certainly wouldn't.