Aw, CRC, I'm so sorry that things didn't go well! I completely understand where you're coming from. I know there are families who keep in touch with the exes after divorce, I truly believe my in-laws would still keep in touch even if DH and I weren't together. On the other hand, my family is extremely loyal to one another. There is no chance of that type of thing happening.
I remember my BIL's GF once got really mad about my MIL because she was talking about his ex and had pictures of the two of them in frames in the house. They talked about it and BIL told his mom to be more respectful of his relationship. So you're absolutely not being unreasonable by expecting her to respect you as her son's wife and her granddaughter's stepmother. You have accepted them all into your life, baggage and all, and you don't deserve to be treated like an outsider. The fact that the ex cheated on your DH and treated him so badly, his mom should side with her son and his choice in marrying you!
Really, I don't even understand why she'd invite the ex! If it's her daughter's day -- graduation party -- what does that have to do with the ex! I understand, she wanted your stepdaughter there, but that could have been arranged in a more appropriate way, for sure! It sounds like she's just one of those people who thrives on drama and doesn't care who gets hurt. My in-laws can be like that from time to time too. I'm sorry you're feeling betrayed and hurt by what's happened. It totally sucks. But it sounds like your MIL doesn't have the best judgment -- everyone else sees the ex for who she really is, why can't your MIL understand why it's not OK? Then, she talks about you after you leave with the cousins. Not cool! She really had a record-setting bad day!
Family business issues are hard, too. My DH has a day job at his cousin's company, and it can get messy. I think if it's coming between you and your DH, maybe the two of you can talk about what options he has to change jobs. I don't know if it's a possibility, but it is nice to make your own way in life and not have to compromise your beliefs because you're worried about how that might impact your livelihood. Your DH sounds like he loves you and wants his family to respect you. Even his dad sounds like he understands the situation and wants his wife to STFU. But you guys don't want to feel like you have to bow down to her unreasonable expectations -- she needs to respect your marriage, or she needs to stay away.
I think this could be an opportunity for the two of you to talk about what you really want in the future. If he can break free from the family business and the two of you can focus on having a healthy marriage separate from your MIL's drama, then I think you could have a very happy future together. He wants you to be happy. But even if that isn't an option for now, and you have to continue to have contact with her, I would definitely put up a wall with your DH and keep her out. She doesn't deserve to get in between the two of you! Sure, be civil whenever you have to run into her, but don't talk to her, don't open your heart up to her, because she doesn't have your best interests in mind. I have had my own issues with my in-laws and I think after this many years that I love them, but we have to be careful about their involvement in our lives and our children's lives because they do things that cause problems from time to time.
A few years ago, DH and I were having some problems and his parents' problems were adding up on top of that. I had a long talk with my pastor about how I felt like I needed to cut them off. I am a very black or white person. There is no gray area with me. But he said that I don't have to jump to the extreme of cutting off contact and walking away from that relationship. If something is happening that I think is bad for my kids to be around, I can pack them up and head home and explain why I'm doing it, and I can be consistent about my expectations. But that doesn't mean I keep my kids separated from them forever. I'm not sure if that makes any sense to you. I have a history of ending relationships abruptly in my life and I think that my mind immediately goes to the extreme choice, but there is a middle ground that could work for you, too. I'm not saying that you need to grow up, just that I had an experience that might apply to what you're dealing with right now and ease the pain a little. Plus, I'm almost 10 years older than you, and I only started looking at things with my in-laws in this way in the past couple of years. So if you figure it out this early, you're way ahead of me!
In my case, my in-laws have an abusive relationship and their drama spills out over everyone else in the family. They've done a number on all their boys, my DH is the only one who's married, but his brothers both have commitment issues and infidelity is a HUGE problem in their family. So I want to protect my kids from learning those bad lessons and I want them to have a better way of dealing with their loved ones. But I can't cut them out of our lives, nor would I really want to. I can tell them if they're acting in a way that is not good for my kids to witness and leave. I can explain to them that it's not OK to yell or curse at one another. If they choose not to respect that, then I'm taking the kids home. And we'll have to work through it before they're coming back! Shoot, I can even use their bad behavior as a learning experience for my own kids. "We don't talk to one another that way." "Your grandparents made a mistake by saying those words." Whatever. I just don't have to pretend like everything is OK and let them teach my kids bad things. Know what I mean? I'll pray for you, and hopefully you will figure out the best way to deal with them.
As for the hostile CM, my FS did a "postcoital" test where she scooped out some CM (she's doing this during my ultrasound appt. on Wed. too). She looked at it under the microscope and can tell whether the sperm is able to travel through the CM or looks like it's getting stuck. I think if it's getting stuck, that's considered hostile. That's why we have a "homework assignment" the night before or the morning of the appointment, to get some spermies in place so she can see them on the microscope.