I wouldn’t do a big deal out of that.
It’s well known the rivalry between a mother and a daughter-in-law.
Dementia? Why in the Earth is she gonna have Dementia? Unless she forgets things I don’t see it.

My mother-in-law, when I visited her country and her house, she made a terrible comment about me, she completely mislead a situation. She dragged me in a situation which she created because her own insecurities, because she is in humble conditions of life. It was all about her insecurities.

I’m not justifying your mother-in-law. I’m only saying that each person has a reason behind to behave as they do and it has nothing to do with you. She would likely behave in the same way with another daughter-in-law.
I would try to guess what’s behind her attitude and make things clear between you and her.
People is now freer in a sense and they don’t care so much in appearance but it wasn’t like that before.
So, maybe she’s still stuck in this matter.
We can’t do many to make another person to reflex on how pointless is to be a slave of superficial things. It’s up to them.
Don’t let this bother you because it’s not your war, it’s hers.