I have had a very similar situation with MIL as well. It's not about being snobby or hurtful. It's really about HATING to throw the gifts from grandma out, that's why we make "suggestions" on what to buy.
As an example; when my SPD son was 2.5 and terrified of the vacuum cleaner, blender, etc and loved nothing more than his plastic dinosaurs and Duplo blocks, he got one of those battery powered ride-on Jeeps for Christmas (the huge, 2 kid one). Uhm, hello? he's afraid of a 3-inch meowing stuffed cat. Oh, and we lived in a 2nd-floor walk up, 1 bedroom, 600 square foot apartment. So that Jeep was about the size of half our living room. And I was 7 months pregnant. And it was winter in Canada. And MIL was so hurt and baffled as to why it would be a "stay at grandma's house" toy. So I do get it.
By the way that Jeep was poignantly placed in the middle of their living room of their huge house (with a garage and backyard and all) for about 2 years. Just to show me it could be done? I don't know.