Actually, I rather agree with Bibbity's suggestion to call the MiL by an irrelevant name. She is being awkward and difficult and will not accept the name the parents have given their child.
It is not, as some have suggested, a matter of no regard. The giving of names to our children is deep and significant, look how significant it can be to adopted children that their parent given name is changed for a adopted parent given name. How surnames can be changed when someone inherits a large sum and estate and takes the benefactors surname, the importance of those private names between lovers, that are never forgotten. The changing of surnames when a parent causes deep harm or hurt.
If I acted like this lady, I think my family would be justified in shortening my name to 'Mon' or 'Nica' , knowing that I hate dimunitives and like the full name.
Sauce for the gander is sauce for the goose, I know that is the wrong way round, but this MiL is a goose.
Start calling her 'Goose'.