How would you handle discord between daughter and dil

If you were the mother of my Dh and sil, how would you handle this boundary?
The simple answer is: with great difficulty; it is the mother of the siblings who will be hurt the most because she loves both her children.
I sympathise with your situation. I am seeing it in the families of people close to me with trouble caused deliberately by a manipulative unmarried sister. In one case the brother and his wife refuse to allow his sister contact with their children, for very good reasons, but causes problems for their mother who does a great deal of childcare, and in the other family the sister insists on accompanying her parents on visits then creates mayhem in the house and in public whilst there. Both of the sisters live independently but have mental health issues and an absolute determination to have their own way. .

All you can do is be totally honest with your in-laws about your reasons for restricting access for your sister-in-law, but the person who will bear the brunt is going to be your mother-in-law, and family discord is inevitable.

I'm sorry you find yourself in this claustrophobic situation with your in-laws. Well done for seeking marriage counselling. It seems to have been successful in helping your husband to understand your feelings.
Your sister-in-law sounds emotionally immature. Now that she is a single parent I imagine she will need even more support from her parents. It does sound as if she is "joined at the hip" with your parents-in-law and this is unlikely to change.
I understand you don't want them visiting your house as a threesome, but would you consider meeting occasionally on neutral territory, perhaps somewhere you could all have a picnic and take the children for a walk? I hope things improve for you soon.

I'd handle it by respecting your choice even if I didn't like it.

I'd probably try to get some help for my daughter too

I think you and your family -husband, children and yourself- need to just get on with your lives, make your own plans and if you see family in the natural course of things then as a strong unit your sil’s behaviours will not damage you. You ask how your mil should handle your relationship with her daughter. Parents don’t have the control over grown children that they do over toddlers. If your SIL and mil have a close relationship then be glad for them. Let go of your anxiety and trust in your relationship. I’m sure this isn’t the answer you wanted but ultimately it’s better to shift your focus to the good things going on in life.

This is so like my sister in law. Not any more, but years ago. She once said if her brother ( my husband), wasn’t her brother, she would fancy him?!

Lot of water under the bridge since then. No need to give details, but suffice to say, they were eventually out of our lives. There was nowhere else to go.

Your children come absolutely first. Your health...mental and physical....is also paramount, as undoubtedly, you are most likely the main carer? Everyone else has to form a line behind.

I wish you well.

Has there been an explanation/discussion with sil around these issues? Is she aware of how you have been affected by all of this? I think it needs to be made clear to her that her behaviour has made you uncomfortable around her. It seems to me that your dh has not been supportive of you in your interactions with his sister and family.
Do you visit sil as a family once a month? Or do you visit pil and sil at the same time once a month?
From my point it feels that once a month is quite often to visit someone that you don't like.
I don't think you mention the ages of all concerned. Why is it that your dh feels uncomfortable visiting them alone? I wonder why sil would want to spend extra time with you when you don't get on.

Sil doesn’t have many friends. She is enmeshed with her mom and dad. And now has an infant through ivf (single
Mom by choice). Where my in-laws go, sil goes.

well then, i don't see why they would expect to bring her along too.
you are all separate households.

Echoes of the situation between one of my married sons and his sister, my daughter. Long story which I’ve written about before. My eyelids are heavy, but I think in this situation you have to bite your teeth - grin and bear it as they say, for everyone’s sake. What about your mother-in-law. I’m sure she is feeling bad about the situation. All the best !

No she does not live with them. But pil live elsewhere and they frequently stay at sil house for weeks at a time. More so mil than fil.

does she live with husband's parents ?

To give an example: my mother in law expressed an interest to be closer to me. I told my husband I am still healing from their abuse but am open to take her out in the morning to show her the hobby I partake in so long as it is just me, my baby and my mil.

My husband said asking mil to come alone will make sil lash out as she wants to be included and would be upset if my mil and I became close.

So I said forget it. It’s not worth the mental health impacts of going down this rabbit hole. I am happy to stay away.

I don’t want to be too specific but suffice to say, her actions towards me would be seen as bullying. Seeing her triggers within me extreme anxiety and I am uncomfortable with how she behaves and don’t want my children exposed to it. And besides that I will not have my kids around someone I associate with almost causing me to divorce my husband.

My in-laws are welcome to visit us in our home. But they must leave sil behind / not ask her to join. That boundary is firm.

it's hard to give an opinion without knowing more about the situation.
i can imagine she is a tiresome person who you would not choose to hang out with.
but what has she actually done to cause irreparable damage to your marriage.
why can't you let your husband take the children with him when he goes to see his parents.
what is it you fear she will do or say in relation to them.