N.J.
Hi Kimberly -
You absolutely did the right thing as far as saying no. You told her your wishes and GAVE her a chance to comply, and she did not. You cannot risk your daughter's safety and well being. Quite honestly, your MIL should not be driving herself, either - she could harm herself or someone else. Perhaps, to keep the peace and show that you do still want her to be part of your daughter's life, you could offer to go see her on a regular basis, taking your daughter with you, and drive her around to do errands, etc. while she visits with your daughter.
Good luck!
N.