Gentle hugs to you (((carcinogen)))
That behavior described of your MIL is maddening to me. Drives me insane just to think about it.

ohhhhhmmmmm ... Got to think about something else. We can really only control our behavior. The sooner that we accept that fact, the easier it will be to let go of our bitter emotions. (Like the resentment I often feel inside.)
Perhaps you should try writing a letter to your wife, in which you express how
you feel. Like: "I feel as though your mom exaggerates things to get your attention. I feel sad (mad, etc.)." The point is expressing your emotions without attacking your wife's.
It can be tricky to do in the heat of the moment ~ so I recommend taking the time to be sure that your words aren't aimed against anyone. That will let your wife know how you feel (to an extent) and not feel the need to attack you in her defense.
I have tried doing this in the heat of the moment a few times, and it really does work! I just recommend that you practice a little, so the words come more easily to you when you are feeling emotional. Me talking about my emotions really diffused the situations immediately. Give it a shot!