I mostly agree with everything bssage has said. I understand your concerns, but at the same time you don't know what it's like to be addicted to cigarettes (no I am not a smoker). People want to quit, and they try, but some people just can't or they fail again and again. It's hard because not only are you used to the feeling and the habit, but it becomes a part of who you are. Certain parts of a smoker's life are just not complete without a cigarette. It is the way they comfort themselves, and a huge part of the way they live their lives day to day. Doesn't make it ever okay to do it around kids, and I agree it would be reasonable to ask her to wear a jacket outside to smoke and then wash her hands good when she comes in. Anything beyond that seems excessive and mean to me, though. Perhaps that's because I am literally surrounded by smokers in my entire family, so if I put out those kind of ridiculously hard to comply with rules (showering, brushing teeth, changing clothes, every time, quitting for weeks etc) then I would pretty much drive away a lot of people I care about haha. Try to be compassionate. Just because something is stupid to you, doesn't mean it isn't extremely important to somebody else.
I doubt that the lingering smoke smell is good for babies, I get that. I don't think there's any proof anywhere of any actual harmful affects caused by it, but I wont sit here and say that it's better than clean clothes and hands, obviously that is best. This is coming from a girl who has severe allergies and asthma thanks to a smoking mom, so I know where you are coming from. However, I didn't turn out this way because my mom went outside for every cigarette and then forgot to wash her hands or change her clothes or brush her teeth before holding me again. I turned out this way because she sat next to me all day long chain smoking in my face without a second thought, including in the car with the windows up pretty regularly. Like my whole life. lol So there is a difference.
And not to get all "crazy pro breast feeding mom" on you or anything lol. But as far as germs, illnesses, and any other yucky thing out there in the world goes, the best and most amazing protection you can give your child is to breastfeed him/her for as long as possible. It combats everything. That will count 1 million times more for your baby's health than whether or not anyone washes their hands before they touch him/her. If you have done any research on how to keep your baby healthy, please do as much research as you possibly can on breastfeeding. Not enough people do, and if you haven't already, you will be glad you did. Just to put it in perspective, my formula fed (after the first 2 months that he was breast fed) 5 year old has been sick so many times I couldn't count, even in the hospital a couple times. Colds, flus, stomatitis, RSV, stomach flu, lots of stuff, tons of which happened during his first year. My 18 month old has had one cold. One. Nothing else, ever. lol Everyone else in my house can be sick and it always passes right over him. Not saying it works like this all the time, and also not saying that babies who are not breast fed are not healthy haha, but statistics are in the favor of the breast fed babies.
Just figured I would throw that out there since you seem very dedicated to having a healthy baby.
In fact, it's funny, combining the two subjects, it is actually still considered better for your baby to continue to breast feed even if you are a smoker (the nicotine and whatnot can get into breast milk), than to switch to formula. Because it is that awesome. I kid you not.
Okay enough of that. Good luck with your MIL. Try to keep the peace. It's not worth all the stress you're putting yourself through! Personally I think 2 weeks after having the baby is too soon to put up anybody for two weeks, much less someone you don't get along with well. I would wait longer.