Who cares what her friends do with their grandchildren? If that is even true. Every child is different. Like my mother used to say to me when we were growing up and didn't get the same as our friends, "You don't have to be like everyone else." You could always counter with, "None of my friends have their babies sleep over at their grandparents." I know, when my children were young, none of my friends had their babies away from them at all. It doesn't really matter what everyone else is doing. They aren't your baby's mother and family. You decide for yourself. What is right for you might not be what is right for everyone else.
I would be very concerned about your MIL's behaviour and risk taking with Covid. The situation in the US is terrible, the numbers high, even in your own community this past week. You have to decide what risks you are happy to take with potential exposure. MIL's behaviours are risky, from what you state. I'm not sure I would be seeing her at all due to that.
Why is your husband so concerned about giving in to what his mother wants? He is a father before he is a son now. Maybe he needs reminding that your son's needs trump his mother's needs, as do your wants as parents. He sounds like he needs to sort out where his priorities lie now he is a husband and father. Why is he willing to make you uncomfortable and have his son become sleep deprived and unsettled for days to keep his Mommy happy?
I'm not surprised you are getting closer to blowing your top. Your MIL is a difficult one. Does your husband know how close to blowing your top you feel?
Your MIL doesn't get to not take no for an answer. It sounds like you (or preferably your husband) need to be very firm and direct with your MIL. If she can't be shut down soon, I don't think the future relationship between your families will go well.
Angela Rayner lashes out and calls Sunak “pint sized loser”.