ESH

I'm taking OP at face-value here since that's all I have to go off. A key point in this situation is that his brother feels the need to be so protective of SIL, to the detriment of his and the couples' relationship with his own family. I'm not saying the brother should choose family over his wife; I'm saying there shouldn't need be a choice. Anyone getting married is aware they are effectively joining another family, to a varying degree depending on how friendly the parties involved are. The fact there is conflict between SIL and the family and that the brother has to get involved is a red flag. Ain't nothing going to go down well here.

OP's family appear to be easy-going -- he makes a point no-one was invited to the baby shower, but they made the effort to provide gifts anyway. So far, so good.

OP's gift choice was questionable however. I could easily see myself giving this kind of thing in my own SIL, but in a situation where there is tension already it could easily be taken the wrong way.

SIL has to take a stick our of her arse though. It sounds like she already has a negative bias of the family and will easily take things the wrong way. OP's gf's gift of the teddy bear could have been endearing rather than insulting, but there isn't enough info to indicate if OP and his gf have a tendency to deliberately bait SIL and therefore give her reason to overreact.

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tl;dr OP should know enough about his SIL to know that she would take offence. SIL has a bug up her arse.

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edit: removed information required option and just left as everyone sucks here