"Latest on our situation is that DH has said he knows he needs to talk to his mum and that he feels her behaviour was unfair to DD but as yet he has done nothing- I am reluctant to push it".
I would bloody well push it because his mother is favouring other grandchildren. Infact I would not at all let his mother or that SIL of yours for that matter either see your child.
Why is that, you feel he could well take her side?. He sounds very deep in FOG (Fear, obligation, guilt) with regards to his mother in any case. He does not want to "upset" her and nor do you.
"I have not felt able to discuss it further with DD either".
Why not?. Such parental paralysis on your part does her no favours and just serves to further lowers her already low self worth; she is noticing that her nan favours others over her all too clearly and you as her mum have not spoken out. Why can't you speak to your child about such favouritism and say to your child that we are no longer tolerating anything like this and I am very sorry that this has happened to you. Not saying anything to anyone just gives this whole sad problem yet more power.
Re this comment:-
" I am still unsure whether to invite MIL to stay in the hope that it offers her the opportunity to engage. I really do not think she was being malicious but I just don't understand lack of enthusiasm to DD either.."
Oh please get your head out of the sand here!!. No, do NOT invite this awful woman over to stay. You after all made a trip up to visit this woman and the SIL and all your DD got from her Nan in a total of 5 hours was the grand sum of 2 sentences. Did you get the same as a child from your own grandparents?. None of this is at all acceptable.
Ok she is family but family members can be toxic and unreasonable. This MIL is incapable of being nice to any of you. You are too nice and keep going back for more abuse and letting your own child get caught up in this as well because on some level you think that next time she will change and thus be a better person. It is not going to happen, ever!.
Your MILs behaviour is toxic and is patently NOT how emotionally decent healthy family members behave. You've both been far too bloody nice (your H has been conditioned not to challenge his mother, her second H also did his bit here as well re that) and accommodating and awful people like your MIL will always take advantage of such niceness on your part.
I am again sorry that you no longer have parents yourself so your DD does not have grandparents on the maternal side but no grandparents are better than having his mother who ignores your DD routinely. I presume this is the main reason why you yourself pursue any contact at all but no contact is better than any contact with a toxic and uncaring relative. Your DD will wonder of you if she is not already why you still want any sort of relationship at all with this woman and will not thank you for trying to get this woman to show her/you/your DH any interest.