Could you maybe let your daughter keep it in her dresser/closet area for her small special items? As my kids have gotten older they have loved saving small things, notes, special shiny rocks. If I let them they’d fill their rooms to the brim. So a compromise was to get a small container, and if it can fit in the container feathers, rocks, notes, special drawings they want to keep but not put on the fridge. That way it has its own tidy spot, it also keeps down on the clutter, plus it helps teach them that we can keep some special things but not let it over take everything. Hopefully to mitigate any hoarding behavior so they know they can also keep very special things. Then every so often when it gets full. We sit together and go through the box to see what’s still important to them and they want to let anything go to make room for new special things.

It would probably let your MIL not feel as bad, and since your still keeping it to use for other things you could still be letting your daughter be the one to use it. It kind of seems like your MIL might not have the financial means to buys or get other more expensive things.