Linguists say that language is polysemous, which is a big word that means language can convey more than one meaning at a time. When your mother-in-law offered to be a real mom to you, you took it as an offer of love, protection, and assistance. But what she may have meant is, “I will be the parent; you will be the child.” Linguist Deborah Tannen has spent her lifetime analyzing conversation. In one story Tannen tells, a high-ranking woman is talking with two people when a woman of lower rank enters the room. The high-ranking woman interrupts herself to compliment the newcomer on her clothes. On the surface, the topic is clothes; below the surface, though, the higher-ranking woman is asserting her right to judge an inferior.
In the beginning, you and your mother-in-law had the relationship of stranger to stranger, which is a barrier. When it became a mother/daughter relationship, it became the relationship of a person of greater rank to a person of lesser rank, at least in her eyes. Accepting financial gifts reinforced that.
Your mother-in-law is happy with the superior position. Asking her to change is like asking a Wall Street banker to give back his hundred million dollar bonus. Put yourself in her place: Why would she think you have the right to change her? What’s in it for her?
We can’t make her nice anymore than we can make you mean. Until some line of no-return is crossed, things will remain the same. You have three options: Limit contact, imagine yourself an actress and play a part, or be honest in every exchange. You might even tell her, like the child in a blended family, “You’re not my mother.”
Once you stop thinking you can alter her, then you can decide what you will do. The real villainy lies in someone telling you that you can change her, because when their technique fails, you will feel you failed.