Eep, I'm very sorry I came off as this way in my rant. I honestly am not demanding another room, in fact I don't mind her declining at all, its just the reasoning I don't like. She's using it as a tactic to force us to parent her way.
We have a small living space in the garage and have floated the idea of moving down into that as our room, and the baby can have our current room, that also got complaints of us having the baby too far from us and again, intense pressure that we HAVE to have the baby with us all night. That's what I am so upset about. We aren't even being allowed to make decisions with our own space, because she is attempting to make parenting decisions for us.
We also aren't living there for free, and I'm not sure how financially secure they would be without us there. My MiL speaks very little english and my partner deals with much of her day to day, she is going to have a very difficult time without him there to deal with everything, so I do feel we deserve a little slack, but mostly I just want her to stay out of our parenting.