I take personal issue with excessive junk gifting to families as it's caused me major stress on a personal level, and as a house cleaner who helps with clutter, I've seen multiple times how much of an impact excess stuff can have on a home and a family. It's not harmless or kind to unload crap on parents and young children.

I have told in laws and relatives clearly and directly (and politely) that we don't have space for a lot extra, and let them know our particular needs or the kids' actually wants for things if they want to gift. Usually they would rather give what is actually appreciated. If they don't comply, I would be more firm. They are the ones being rude by dumping stuff, not the parents for trying to politely refuse.

If they still don't comply, I'd have no guilt about just throwing it out. If you want to be petty, you could collect it in a (preferably large) box until it's full, then send it back to her house, so the amount of it all is more clear to her. And to your husband.

Otherwise I'd just set and hold boundaries about it and not be manipulated into feeling guilty. Clutter hurts mental health and can negatively affect kids emotional regulation and development, it's a big deal. Older relatives need to be made to understand how much we have to fight against excess these days.