any advice how to deal with mother in law

hi where do i begin,ok my hubbys dad and stepmum came over for a holiday and stayed with us to meet my kids who they have never met before only spoken to on the phone,well my hubbys real mum got real mad and didnt speak to us when she found out they were coming over,she is a very jealous woman,well everything went great my kids loved their grandparents and spent alot of time together,well they went back home and over the last school holidays my girls went to stay at my hubbys mums house for 2 nights but after the first night my oldest rang in tears and wanted to come home my motherinlaw called the other nanna awful names and said she isnt your nanna and dont u love me ect ect so my daughter told us my hubby confronted his mum and since then hasnt spoken to my daughter making it very uncomfortable,was my daughters birthday yesterday and she just ignored her what is the best way to deal with the situation and suggestions

Oh my gosh - that's terrible! Your MIL is acting like a teenager, if I may say so!

I think you just explain to your daughter that some people have problems to work thru, and that it's no reflection on her. Obviously your MIL has some pretty major issues and she's playing power games - she wants everyone to suck up to her so she has some control. I would wait for her to come to you, after a while she might realise how her behaviour alienates everyone and only makes her miss out in the end?
I guess some pretty horrible stuff went down when your FIL divorced her, and she hasn't gotten thru it yet (and is taking it out on your kids). It's like your FIL chose the new wife over her, and now she's making other people choose too (that's how it seems just from what you wrote, but I know there's probably more to the story).

Anyway, your first priority is your DD, so I'd just make sure she knows it's not her fault and that lots of adults are sad and they have some things they need to work out, but it doesn't mean she doesn't care, etc etc etc.