I wouldn't approve of taking any elderly person to any Restaurant for Christmas lunch - not this year. But it's not my elderly relative, so I wouldn't even bother to comment.
If my dear Mum was alive this Christmas, given the lonely and confusing time she would have been enduring for so many months, and I knew that she was longing to have a Christmas meal with me, she'd be in my bubble and we'd have a lovely day at our house. But I would only be making a decision for my Mum, not anyone else, so I would take the responsibility for that choice.
But for anyone else...and for you......you should do exactly what you want to do and not worry about having to justify the why's and wherefore's. Not your in laws' place to "insist" on your doing anything. People extend invitations, they ask, they enquire, they propose if someone might like to come to eat or for a drink, and normally would expect one of two obvious responses. What they should not do (and to avoid disappointment (!!!) is make demands, give instructions or orders, make assumptions, or make arrangements for other adults - whoever they may be. That's not hospitality or anything to do with the spirit of Christmas - that's just overbearing people determined to get their own way. Now's your chance, as an earlier poster says, to put on those big girl pants, tell them you are doing YOUR own Christmas and thank you very much for thinking of you, but no thanks. And stick to it. Make sure that your OH is 100% in agreement. Have I had experience of this kind of behaviour? I have and I can assure you it will go on for however long you allow it. This year you have the perfect excuse for ignoring their demands because you need to behave responsibly. You aren't telling them what to do, they should certainly not be trying to do that to you.
Don't be an unhappy sheep. Make a stand! You'll feel so good when you see how easy it was.