NTA- My family is Muslim and religious and I always found it weird how some in my Mom's family do a full Christmas and barely do anything on our own holidays. They are far from Christian, not even atheist mostly, but love doing this stuff. It's just sad that when our holidays (Eid, Ramadan) come around they all fast and go to the mosque but then just do like... nothing. I've never said anything to them but I think it's strange that Christmas has all this buzz around it and we act so deflated when our own days come around. Their reasoning is just that everyone has a day off on Christmas and not on Eid, but I also think it's so weird they don't request a day or two off for Eid.

Just saying you don't want to go the full 9 yards on Christmas isn't an AH move especially with young kids. They aren't deprived—I'm sure you did plenty of family activities during High Holy Days and Hanukah. It's ok to set boundaries on what traditions your family observes, especially if you are religious. As an advocate of trying to make peace with in-laws, maybe apologize to MIL and let her know you'd be happy to get dinner on Christmas in the future but don't want to do full presents. Maybe suggest framing the gifts as late Hanukah presents for the kids and ask her to give gifts during Hanukah in the future.