I'd suggest a few things:
- dog gets put in pet pen for short visits
- MIL gets a dog trainer to give her instruction on working on the dog's anxiety & territoriality
- Teach DD how to interact with dogs. I know this is hard when they're very young, but constant reminders and instruction does help.
- I wouldn't stay there overnight anymore. If it's a long distance from home can you get a motel/airbnb for the night?
- If MIL can't keep the dog away from the kids, then arrange to meet out of her house, eg. A park, cafe or at your house.
I wouldn't ever let my kids be in direct contact with that dog again. Your poor DD, hope her injuries heal quickly