I think the main thing that this has highlighted is that your SIL is absolutely someone you should be very wary of allowing too close to your family.
Her entitlement is breathtaking. No, it isn't any of her business. It's very worrying to see the extent of what she believes are her 'rights' over you and your DH, your relationship, your family.
Those who compared the situation to deciding to abort a pregnancy make a good point. Would anyone ever assume that being an extended family member gives them a say, as theoretically, they are 'affected' by the decision in 'losing' what would technically be a blood relative? The notion is insane and utterly nauseating.
This is on the same level - it's absolutely a totally private decision between you and your DH. Her argument is nonsensical - she may as well argue that your decision to have only two children has denied her the chance of a third niece/nephew. The child will not be her niece or nephew whether she likes it or not, because that decision has already been taken - in the same way you and your DH, for example, decided to stop at two children.
Extended family members just do not get to have a say in the decisions a couple make about their big life choices on the grounds of being 'family'/ 'linked by DNA' - it doesn't give you a say. It just doesn't. SIL has no respect for this. I can only assume that if you were to try and move abroad she would have the same reaction. You aren't allowed. I'm your sister and that gives me a say in your personal, private life. NO.
You shouldn't have told her, obviously, and the one thing I would take away from this is -never include her again. Never tell her stuff, because what she will take from that is, they're telling me because I have to know. They're running things by me. I'm involved. I get a (hysterical, selfish, knee-jerk) say in it.
What I would do now is discuss the issue with your friends and then cut SIL out. Make the decision as it should be made - entirely without reference to a completely incidental person.
And then, if you decide to go ahead, lie to SIL. Sadly, this has shown that that is your most sensible option. It really is nothing to do with her anyway and I would put at the forefront here the people who matter - you and your friends. She's shown she can't grasp the position she is actually in - ie not a decision-making one - and she has already expressed that she will interfere - so, she gets cut out completely.
And watch her after this. Make sure she isn't too involved with your kids especially. Nice aunty, yes. Decision maker and pushy sticky beak - no.