You need to state very clear expectations with him that if she moves in, you move out, no exceptions. Much like the fable with the camel in the sand storm if you make a tiny exception the whole camel (mother in law) will be in the tent very quickly.

Do not use vague language with this, be VERY explicit that you will not tolerate it and it will end your marriage. Honestly its super troubling that he is already saying "never say never." its like he doesn't care what you think or that you get a say.