I am going to offer a thought that runs contrary to all the threads here. I've never had MIL problem, but I've deal with this kind of thing. Here's my advice:
Go to your mother in law and say that you heard she was unhappy with your actions on the fireworks night, and ask her if this is correct. (Do this in a straightforward but neutral way, not a belligerant way.) She may say it is correct. If so, you explain in a friendly tone why you did what you did, and that if a similar situation occurs in the future you (or your husband) will probably do it again. (I'm with you on the kid removal, BTW.) Say this like it's just for her information, as in "this is the way we handle these things in our house." You might throw in a perfunctory "sorry it bothered you" but make it clear you have no intention of doing things differently. Game over.
The second response is that she may say, "Oh, no, of course not! Why would I ever say such a thing?" In that case you have two possibilities. One is that you think she's lying. Don't call her on it, just say that you hope in the future if she ever DOES have any problem with you that you'll hear from her directly. Everything's in a friendly, matter-of-fact tone. Game over; you've called her bluff.
OR....she will be genuinely shocked that you heard something that was untrue. In that case, you don't have a MIL problem, you've got a SIL problem--and if that's the case, your MIL will shortly be tearing your SIL a new one, for trying to stir up trouble and making her, the MIL, look like the instigator; SIL. meanwhile, will have been defeated in her purpose of trying to get herself and you on the same "side" against the MIL. How they work that out won't matter to you, because as far as you're concerned the game is STILL over.
I really believe that sucking it up, biting your tongue, acting "sweet" etc. just plays into the drama here. The best way to end the drama is to simply refuse to participate (though my experience is that people who like to stir things up this way are endlessly inventive about thinking of new ways to do it--so stand by for more such foolishness).
In any event, refusing to play the game relieves you of the immediate problem and ships all that negative karma right back to the sender. Much better than trying to stuff it, I think. It also sends the message to whoever the troublemaker is that whatever it is they're trying to do to you, they have met a worthy adversary who doesn't mess around....and that should make future in-law visits much more tolerable.