I think you are trying to manage a very difficult situation, and feeling the struggle of trying to provide balance in the family. While it is hard to know for sure, your analysis of why she is like this is certainly in keeping with relevant theories on this type of passive-aggressive behavior. This is difficult, but I do think there are strategies that might help.
From your description your mother-in-law doesn’t sound like she knows or cares that she has this impact on you. You will need several tools to unhook from her cattiness and sly remarks. The main feature is to not let her activate your defensiveness. In other words, the work here is to ‘detach with love’ as the Al-Anon programs might say, and don’t take any of her bait.
There are three strategies that tend to work in these situations, and they come in varying degrees of leverage. All three have one thing in common, and that is to leave the discomfort with her rather than with you. This is not antagonistic, but rather leaving the problem at its origin, with her.
In his classic book, Zen and the Art of Motorcycle Maintenance: An Inquiry into Values, Robert M. Pirsig referred to the fact that the Japanese have a notice at the beginning of their instructions on how to assemble a new purchase. The notice says (I am paraphrasing): “To begin, the assembler must be in the right frame of mind.” This is where you begin with your encounter with her. Begin in the right frame of mind, which is: This is her issue — do not let it become yours.
When she says an unkind comment or criticism offer back a simple descriptive statement of what she said: “It sounds like you’re unhappy with how I keep my home.” Or: “You seem disappointed in what was served for dinner.” In other words, let her criticisms and persecutions be hers. Again, don’t take the bait and feel the need to defend yourself. A descriptive statement allows you to stay present but not become overwhelmed by her taunts.
The second coping method is to respond with a statement that directly identifies the fact that the issue is hers. “It must be hard for you to feel so disappointed so often.” Or: “It seems like you are unhappy when you are here.”
The third encounter has a uniqueness to it because it is twofold. It uses a question as a way of undoing the hurtfulness behind her condescending or persecuting manner. After she has said something hurtful, ask a question: “When you say things like that, do you ever wonder what it might be like for me to hear?” “Or: “Are you aware how often you say things like that?” Or: “Are you this unhappy when you are at home?”
The second part of this depends on you, and what you feel is appropriate. The stance is the same: This is her issue; do not let it become yours. After she answers the question you may use the other strategies to stay engaged without becoming defensive.
Typically someone like your mother-in-law is skilled in not taking responsibility for his or her passive-aggressive hurtfulness, so a direct confrontation is usually unproductive. But offering some feedback in this second part might be helpful, as long as you keep your expectations low. After asking one of the questions in the previous paragraph, you might try adding something like: “…because when you say things like that it makes it hard for me to be around you.”
Don’t feel the need to explain or defend yourself. Doing so will get you nowhere but more frustrated. Just say what you feel is factual, then go back to the other strategies without trying to defend or criticize. Your job here is to protect yourself from feeling overwhelmed. With some practice your mother-in-law will learn that she isn’t upsetting you, but that her insults land back on her doorstep.
If your husband is agreeable you might ask him to help role-play with you to build up your skill. This may help the two of you bond over the issue as well.
Good luck with this. It will take you a while to get good at responding but in the words of the great Eleanor Roosevelt: “No one can make you feel inferior without your consent.”
Wishing you patience and peace,