holidayneeded - sorry to buck against the trend but I would suggest some kind of half-way house or compromise.
I say this with some understanding of the problem because I have a childless sister who is very interfering, making me feel bad about my mothering skills, even sending me emails with childcare advice. She does it because she cares but it drives me nuts and we argue a lot. She makes me feel like dd is her child and I am the nanny.
If it were me, I would first of all have a stern talk with your dp, explaining to him that this is a serious problem, making your life miserable, and he needs to support you instead of sitting on the fence and having an easy life.
Then I would go with your dp to see your MIL and have a stern chat with her, explaining that if she does not stop undermining you and going against your wishes, with regard to the care of your son, then you will need to make alternative arrangements for his childcare.
Explain that you are very grateful for her help and you know she means well and does it is because she cares. That her opinion and experience do count for a lot but, at the end of the day, you are his mother (she's had her turn with dp) and what you say goes.
I know this is difficult but I had to have a show-down like this with my sister. She can't help getting anxious about dd, because she cares so much about her, as your MIL cares for your son, but you/I are/am the mother and our wishes must be respected. !!!!!!!! If your MIL is like my sister she believes that because she helps, she has a say. This is certainly true but you/I have the deciding vote.
I would also, without cancelling the MIL arrangement altogether, arrange for ds to attend nursery a few hours a week to start off with (perhaps she could take him?), with a view to increasing to 1 or 2 half or full days a week over time (finances and logistics allowing). This is because it will allow him to socialise more and to take advantage of the other opportunities that nursery provides. Explain this to MIL and that it is not because you want her to stop looking after him altogether but that you know it is hard work for her and you want to broaden his horizons a bit. If he takes well to nursery, it gives you more options for his childcare and makes you less dependent on your MIL, gives her less power and you more.
Sorry to ramble and be opinionated but I hope you can get the gist of what I am saying. Hopefully she won't blow a gasket and refuse to look after him at all (she is probably very attached to him so I doubt this will happen) but if she does that will make your decision and he will be better off at nursery.