As Catholics we put obeying the laws of the Church above feelings of awkwardness. That is how we honor and follow God. MIL probably sees puting rules before feelings of fellowship as sinful. The best the two parties can hope for is a civil disagreement.
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SMHW - I think this is where the problem lies. She knows that Catholics don’t receive in other churches. She feels this is wrong, wrong, wrong. And that I am a victim of orthodox Catholic meanies.

She has mentioned a friend who “grew up believing it is a sin to receive in other churches” and “is dealing with all that guilt” laid on her by the church. This friend told her about Catholics in Florida that are working toward a change.
So I am going to have to face this head-on, as suggested by many of you, and pray for the best. I will pray to St. Michael. And it ain’t going to be pretty. I think the best approach may be what some of you said about pointing out that I don’t dictate to her what she should do, and I cannot allow it with my kids. She is so wonderful to spend lots of time with them, and there is no question that my children will go to church with her sometimes when I am not with them. I am going to have to make it clear to them and to her that they are not to receive communion.
I am angry that this even has to be a discussion. That what I believe is not respected, even if she doesn’t agree.
Please pray for me.