@ZombieMombie,
Your MIL doesn't do boundaries?
Well it's about damned time she started.
You're fine; she's controlling and nutty. Just because the others in your husband's family have handed over their spines for safekeeping doesn't mean that you and your husband have to.
You have gone above and beyond in terms of trying to make this work. It just plain doesn't. Tell your family that your door in SD is open to them and if they ever feel like flying over that they are welcome to come over.
It's pretty much a given that they'll never take you up on it so it's a safe statement to make (and even if they do, it won't be for more than a week at the outside. Suck it up and deal and then move on with your lives).
As for your son growing up without his cousins, etc., this is why FB and texting and other things exist. And if he ever wants to visit his cousins then of course he goes with your blessing.
True story: one of my closest cousins in terms of temperament lives in Sweden. I've seen him in person I think twice and the last time was a good 20 or so years ago. I live in Boston and we aren't even of the same generation. But through the magic of the internet, Leon and I are kinda close—and he's I think a third cousin of mine.
Your son may in, time, find that there's family like that who 'get' him. Your MIL may even turn out to be one of those people.
But for now, stand your ground. He's your child and you have the right to set boundaries for him. If your MIL can't respect that, then she loses visiting privileges.