If my husband said my Mother-In-Law could watch DS without me being okay with it, I would FLIP OUT ON HIM!!!! I am pretty protective, but not the the point of being unreasonable. And like you, I have a history with my in-laws that makes it a bit more complicated.
I’ve been in a similar situation, though to a lesser degree. My in laws actually have some restraint, although they still make comments a lot. We stay with them on weekends because my husband generally has to be there to help on the family farm so the hired guys can get some time off. DS is 15 months now.
On July 4 I was at my in-laws after being home alone with DS for the previous 2 days. We had begun mild sleep training to get him to sleep later than 5:30am. My Father-In-Law lost it when DS was fussing in his crib (not even crying) and told me I was abusing my child. It blew up, and has since mostly resolved. But there have been many comments and they undermine me in passive ways, like giving DS crackers when I ask that they not fill him up on snacks. Or making me feel guilty for putting him to sleep at his bedtime since they want him to stay up and play with him more.
First, I would let your husband know that you value his mom’s involvement in your daughter’s life and that wont change. However you need to draw some boundaries and you need his support. You and your DH need to come to some agreement or it will constantly be an issue in your relationship and eventually you will be resentful. I would think about how you were raised vs how your DH was raised. Think about the more general aspects of what you each want for your daughter with the specifics (grandma involved – grandma is able to do x, y and z, but not a and b.) Take some time to think about the specific concerns you have and what you can compromise on versus what you can’t. It might help to write things down so that when you are discussing it you remember everything and don’t get too emotional.
Once you and DH have an agreement, he should talk to his mother. He needs to explain that you both want her involved with your daughter, but that there need to be some boundaries. These are the things that are non-negotiable, and these are the things we are more flexible on. (For me, DS’s diet and sleep were really important.) If you don’t talk to her together initially, then I would follow up either you and she or you and DH with her. I would reassure your Mother-In-Law that you love her, value her and want her involved. But also explain that this is YOUR daughter, not hers. She had her own kids to raise and this is your turn. You value her input, but ultimately she needs to respect your decisions and not undermine you, otherwise you’ll be around her less.
Ultimately this is YOUR daughter and YOU call the shots. With your DH, of course, but I think you and he each have veto power when it comes to a third person caring for your child. If one of your aren’t comfortable, then the other needs to respect that. In this case you are uncomfortable with some things and DH needs to support you. If he doesn’t, I urge you to be confident in who you are as a mom and stand up to your Mother-In-Law anyway. It will be hard as hell, but I urge you to do it. The longer she feels she can push your around, the harder it will be to change things in the future.