She clarified that she did stand and was respectful while declining to practice. That's fine.
I don't want to engage in a completely pointless and irrelevant argument with you that will do nothing to help the OP's situation as this aspect has already been clarified and resolved, however I will share my reasoning.
I am agnostic, thus I am not really a member of any organized religion. I am open about it but respectful. For Easter, a large group of my mother's coworkers held an American expat potluck to which I was invited to. Prior to eating the paella, the Host called for a prayer and asked to say grace. Now people were from different religious backgrounds, different countries, etc. all united just due to being in the same proximate area. But there wasn't a singular person there who didn't just shut their eyes and bow their heads a little bit for the 16 seconds it took for him to say it.
If someone stood there looking curt and offended and just refused to participate, that is fine and their prerogative. But it is a bit rude to do such a thing when you are a guest in someone else's home. It's not like they imposed it upon you in your safe place. OP was invited to a dinner at her BILs house where they are a) Celebrating a religious holiday of importance after attending a Catholic church and b) predominantly Catholic. She went into their home during a time of ritual and ate food that, to them, was celebratory of Jesus Christ. She was a guest and had she sat down or walked away, it WOULD be extremely rude.
It is the same with something cultural, if you are invited to a gathering personally to celebrate a religious or cultural thing, lack of participation due to not belonging to said group is considered rude. I couldn't imagine during that moment of silence before the paella just standing there ignoring everything and, if confronted, saying "Ah yes, 'pretend to follow along with my rituals' is somehow rude rather than you acknowledging "Hey I don't practice your beliefs and don't have to play along to not remind you that there are others who differ from you." It would just be very rude and uncalled for.
tl;dr You're entitled to your opinion but I respectfully disagree. When you are a guest in someone's home and they are celebrating a religious holiday and invite you to come, it is rude to not participate in a very simple, short, common gesture pertaining to said holiday. It's not like they were asking her to get baptised in order to cleanse herself of her sins. They were asking her to stand for a few seconds while someone talked loudly thanking the lord for food and to have her hold hands. It'd be rude to just sit there and gawk at everyone and be offended in that situation that you were forced to participate in a religious ritual. In other situations I can see where it wouldn't be rude, but in this one it would've been, no excuses. If she wanted to exercise her religious freedom by not participating, that's fine, but it's still a bit rude when you're a guest in someone's home celebrating a religious holiday.
tl;dr2: op did nothing wrong and I don't want her to misconstrue what I am typing here as a criticism, I also don't want you to feel like I am being too critical, it just simply how I perceive the situation, as I am sure many others would. Holiday traditions gonna tradition.