First, I just want to say you're doing a good job. You're rocking it out. Fuck the haters.
Then I want to tell you something my mom had to learn. I know it is an in-law and it is different, it is ALWAYS different, and I really not trying to give you unsolicited advice, because this is not advice, just commiseration. I just think she's incredible and you could use the story right now. My mom had to learn the hard way that no one was every going to approve of the way she did things. Her siblings all did it the "right" way and she left home, broke, and put herself through school and basically cut her own path to no one's approval. Her parents were constantly trying to put her on the straight and narrow. There's a famous story wherein my grandma asked my mom when she was going to meet a rich husband. My mom fired back, "I already have...he's rich and he's somebody else's husband" (not really, it was a joke). She had me out of wedlock (LTR, they just didn't get married) in her thirties. She swore, she drank, she lived hard, she loved me fiercely, and she parented me by a code that got her a lot of calls from my grade school teachers for being, shall we say, "outspoken".
But what I remember is this: no one ever screwed with me. They could yell at her all they wanted, but they never had the balls to make it about me. Because they'd have to go through her, and they were way, way too afraid to do it. And occasionally, someone would say something, and she'd listen, nod politely, accept their pointed comments, their passive-aggressive jabs, their raised eyebrows. And she'd nod, smile, and nod again. And then she'd tell them the politely go fuck themselves; I was a star student, a great kid, with a happy healthy home. I was loved and thriving, their rules and standards were puritanical religious nonsense, and their body shame/censorship/anti-intellectualism was their own business and had no bearing on her or her family.
She was not popular at girl scouts.
But, while I didn't get it at the time, I look back on those moments in awe. In terms of class, she was at the bottom of the pile in a very wealthy town with a kid who was kind of weird and she never once blinked. Be it family, friends, strangers, the PTA, my friend's parents...she dared them to come out and say it. And they never did. The lesson was that shame can only come from inside. She was proud of what she did, who she was, how she raised me, and all the rest. They were NOT going to bully her because she didn't feel bad about it. No part of her was going to let someone else make her feel guilty about her life, my life, or the realities therein.
And BECAUSE of that, I grew up without that shame either. Which is probably the greatest asset I posses.
It's a long-winded way of saying this: fuck your MIL. So you swore. A ten year old knows all the words, they don't care, it doesn't matter, it is moot. And I'm sorry about the job. That fucking sucks. Your kid pulling his dick out is what boys, of all ages, are prone to do. There's never been a male human in the world that isn't fascinated with his cock. If she's shocked by that, let us take a moment to mourn her absolute dearth of a sex life. If she thinks you're a horrible parent, just enjoy the fact that she's insane and leave it there. She's not in touch with reality and that's her issue, not yours. And when he ends up working at NASA or getting his paintings hung in MOMA or just being an amazing real estate broker, she can eat those words and you can enjoy the schadenfreude.
Drink that Vodka. Hell, drink it out of a real glass. With a lime. And ice. If she judges you.....oh well! She was going to find a reason to do it anyway. You might as well make it simple. It'll give her something to talk about at bridge club.