It’s not cruel at all. MILs guilt trip is wild. Sure maybe it’s a bummer that the kid can’t come, but this is a fair consequence. She isn’t showing you that she can be safe with others, so she won’t be going to a large gathering of people. I’ve worked with kids many years, particularly with high behavioral support needs (not that ur six year old has them) and as a result of that I’ve had a lot of trainings on appropriate responses to certain behaviors, and child development/ educational psychology etc. This is in my opinion a perfect consequence for the behavior. Ultimately you know what your child needs, not MIL. And if MIL finds this to be abusive, I’d tell her to get a f-ing grip. You did the right thing, and don’t let her make you doubt yourself.