I probably have a bit of a different perspective here. I've had two sets of in-laws - my first husband died of cancer several years ago when we were in our late 20s. His parents were difficult to deal with. It seemed like things would get better for a while, that we had at least agreed to disagree on certain subjects and drop some arguments - and then right as I started to relax a bit, another blow-up would happen. There were absolutely times when they displaced their anger and hurt about other issues onto me (i.e. their younger son's behavior was a major problem, especially when we first got together - and at least one memorable time, his mother screamed at me right after fighting with her other son). My late husband had also reached the point very early in life where he felt he couldn't easily be himself with his parents' input. Later, I think they blamed the fact that he almost never asked for or took his parents' advice on me (although that had been going on for several years before we got together). They don't deal well when they're not allowed to control people they feel they should be able to control. Until I came into the picture in an increasingly serious way, my late husband just avoided dealing with life choices and permission issues with his parents whenever he could. But my being there challenged their illusion that they still had some control over, and an open relationship with, my late husband. It took a while, but my late husband realized he needed to form a strong, unified front with me - that that was the only way to help keep them from getting between us (they even physically tried to separate us when there were disagreements at times!). Some times were rather bad. But the fact that we had a unified front 90% of the time - and pulled ranks even more closely together when they got really belligerent - kept a lot of incidents from getting far, far worse.
When he was dying of cancer, at times they did help us out. But there were also times when, even though we could have used help (and if my family wasn't around), we politely but very firmly told them in particular that we had decisions to make that we needed to make alone. Obviously that was hard for them - they were his parents. But ultimately - after his death - they actually appreciated me more and realized how much my late husband and I loved each other and how good we were for each other, even if they didn't always agree with being shut out or didn't like it when we didn't take their advice.
Why bring this up? I agree with the posters who said you and your DH really have some stuff to work on. I understand trying to avoid difficult conversations... but after a while, when it's something major like what type of relationship you are trying to work towards (husband-as-head/wife-subservient vs. a partnership), you MUST discuss it and figure out for yourselves how to work it through. Biblical or just psychological counseling-based, I agree with the poster who mentioned that a husband is supposed to make a home - psychologically as well as physically - with his wife. There WILL be times when it will be utterly impossible to please - or even appease - both wife and mother. When push comes to shove, especially in a stressful period, a married adult man needs to side with his wife when talking with his mother. This may mean that husband and wife have A LOT of discussing to do behind the scenes later - but in the semi-public situation of dealing with in-laws, there needs to be a unified front. Period.
While your MIL was quite unreasonable (I think you don't owe her an apology, FWIW), the bigger issue I see is your DH needing to realize that he needs to make sure he his protecting and nurturing his home front... even if his Mommy isn't always happy about it! I'm not saying that he should be oppositional to his mother for no reason. When it's a small tiff, trying to ignore it, or if she's persistent, make a comment along the lines of, "Gee, Mom, thanks for that different perspective. We'll consider that when we discuss the issue privately later. More cornbread?" is the way to go. If she really pushes her way into issues that are not her business - even if she's helping out with something - your husband needs to stand up to his mother and tell her that that is her perspective based on her own life and how she chose to raise her kids - but now it's his family, his perspective, and his wife and kids, and she has to respect that - or take her opinion elsewhere.
As far as your MIL, I also think that when it comes to child-raising, people of previous generations often get particularly defensive because they think that if you don't do things exactly how they did it with their kids, that by definition they were bad parents. So instead, they attack you and call YOU the bad parent for not doing things their way! Perhaps if it helps, you can try to see her criticisms as being rooted in a deep insecurity about whether or not she did right by her kids. While I think (unfortunately) most of us will have at least some things we'll wish in retrospect we did better, perhaps she really feels she did some things wrong (maybe because of FIL's being so autocratic?), and regrets it, but can't voice that. While my now-husband's mother is cautious about saying too much (not-great relationship with other DIL), she has at times made these comments re: breastfeeding that have irritated me. She did nurse her kids, but on a more limited basis, plus I think alternate cultural issues were at play. But I think she wishes she could have nursed longer (she worked at least part-time) and probably feels badly about that, so I figure the comments come from her own regrets as much as being somewhat ill-informed about current recommendations for breastfeeding, and some well-meaning (if uninformed) concern for both my and my son's well-being.
I also strongly, strongly agree that you need to get some kind of therapy. Look around your area - often there are sliding-scale programs out there, volunteer counseling through churches (if you're open to that), etc. I didn't go through a fraction of what you went through for your second birth, but it still took me some time to process some of what happened with my son's birth.
We all come to our relationships with our own unique baggage, for better and worse. I'm doing therapy now - and I'm finding that a lot of my own parents' parenting choices are coming up rather painfully as I work out my own goals for my son. For the most part, I have forgiven them for a lot of that - I just have to work through some remaining hurt and try to use it to better inform my own approach. And I also have found that my experiences with my late husband's parents, as well as remaining hurt from that, has been an issue. Plus, they pretty much stopped communicating with me when I got engaged, although they did give us a wedding gift and a baby gift, which was nice of them. But they were my family for several years, so it does hurt to have lost them (as well as extended family on that side, but that's a whole other set of issues), and know that they wish their son was still here instead of me (that's just fact, and I understand that). So I do understand about hurt from in-laws.
Ultimately, I do agree that you can only control what your reaction is - to a point. But it's not easy to start to let go of situations like this, especially if you're a "stewer" as I am. I don't agree with dishonest "apologies" when you don't mean it, especially when it's likely to just get your MIL to jump all over you once again. Writing the letter to not send is a good way to think about it and work through your perspective.
But, you and DH need to work on your style as a couple, and your approach in dealing with family - especially your in-laws. I think it's perfectly appropriate to take breaks occasionally from family, if needed, to regroup and decide on what you will accept in the relationship. But things will likely only improve if you and DH work things through and decide on a unified approach. It won't be easy at first, but it's necessary and will ultimately likely improve things.
Hope this helps - maybe my insomnia tonight will be good for someone.

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