I think it depends, in part, on what your contribution was to be. Did you just agree to provide the space, or were you also planning on contributing to the food and decor? If she has added so many people that it has added to your expense, or if you would need to rent chairs, then it's unfair of her to burden you.
But I'm thrown off a little by your use of the term "tasteful event." Did you envision some sort of elegant luncheon around your dining room table, and now it's getting bigger and will perhaps shift to buffet foods on people's laps, losing your idea of elegance? Or do you consider too many gifts to be less than "tasteful" so this is feeling more like a "gift grab" to you? If it's either or both of those, I think you might find a way to share in her excitement and her desire to show off her future DIL to her friends and family members. The groom's mother doesn't normally do a lot of the wedding planning (although that is changing in many families and social circles), so perhaps she's getting a little giddy with the joy of this. Can you find a way to let her have that fun? It might not be your kind of party, but this is her event, isn't it?
If it were me (and I realize it's not), I would get a few neighbors to lend me some small folding chairs and an extra table to extend my dining room table, or some occasional tables/TV trays and the same folding chairs and just squeeze into the living room or den. I'd push the dining table to one wall and do a buffet. But that all presumes that you are just providing the space and that you aren't getting hit with bills for tablecloths and decorations and extra food.
Whatever you decide, I'd do it now. There's no nice way, once the invitations are out, to have her calling people to say there's a new location because you couldn't manage it. Sure, she could say "we've outgrown our space and are moving to XYZ location," and maybe she would, but that makes work for her especially as the date is closer. If you agree to 20, what will you do if it grows to 22 or 24? You can't keep upping your total and making a new maximum.
So, without knowing why this is a problem for you, I can't suggest whether it's better if you adjust your vision of the event to suit the family or if you tell her now that you're willing to make a few calls to find a church hall (if they'll let you do champagne or other alcohol, if you so planned) or perhaps a private organization (Elks, etc.) that rent out their facilities. If she was trying to save money by doing it at your house, that second choice is going to be a problem. However, you might adopt the attitude of "the more the merrier" which will make you look like an amazing and generous hostess who was incredibly flexible. It depends on how much this friendship means to you, I guess.