lordy this has taken me all evening to read through! THUM, I feel for so and for you, I really do.
Is there any chance that your MIL is just fiercely jealous that you had a DD and she didn't? I see your DH was an only child. Not that it excuses her in ANY WAY AT ALL, but it might be that she has mental health ishoos about it and was going to pretend that your DD was in fact her own DD. Wild guesswork here - but to me, she is clearly mad as a box of frogs. How on earth did she think she was going to get away with it, and as I also truly believe that she sent the initial text to you on purpose, why did she alert you to the situation? See - totally illogical, and therefore mad as said box of amphibians.
Definitely go to the christening. Your MIL will be diluted by everyone else, and your CIL wants you there (it being her party, it would be churlish to let her down).
I remember when I was 15 a girl in my class had a party and everyone in the class was invited, so I assumed I was too - then another unpleasant girl said in front of everyone - "Thumb, I don't know why you're talking about it, you're not invited". I was v. upset and embarrassed but other girls took me under their wing and made me go to the party and nobody said anything to me about being there, and no one tried to make me leave. It was a very petty, stupid incident and I have no idea why I was originally excluded, or even if I really was - just someone being v. bitchy and power-hungry.
I find in situations like this it is a good idea to pity the poor sad cow, as she clearly has ishoos that she needs help with. She has ruined her relationship with you, forever, but she has done you a favour - she has highlighted your DH's lack of respect for you and that needs to be addressed pronto. Not just the collusion, but also the refusal to talk when you wanted to, the playing of video games and going drinking with friends when he should have hightailed it home to sort things out. He needs several swift kicks up the jacksy.
Have a great time on Sunday - stay calm with the old bag for sure, but if you can throw in a bit of pitying condescension as well, you know "poor dear, it is sad when they get confused like that, and at such an early age too" sort of thing, it might help you! but make sure it sounds genuine, not bitchy of snide!