L.S.
Oh, that's an uncomfortable situation! My oldest son's fiancee and her family have all been friends of ours for years. He's literally marrying the "girl next door", so I look forward to having parties together someday. But I know how this feels. My MIL and my mother really don't get along, and we've always had to do separate things throughout the years. In the end, though, it's your daughter's call, I would say. For the sake of her and your grandson, you'll have to abide by her wishes. You may have to put on an Academy Award winning performance to do so, but that would be best. If you try to fight this, you could damage your relationship with your child and grandson. That's a lot to risk, I would think.
Hang in there!