If i was you i wouldn't be so understanding, i would simply say, dog is put away somewhere else or we don't visit you, simple as, it is then her choice as to whether her dog is more important than seeing her son/grandson....................failing that, tell her if the dog isn't going to be put away, they can visit you......................without the dog
The fact this dog has bitten before, you have every right to be putting ground rules down, we all know what damage a dogs teeth can do, especially to a baby, it doesnt bear thinking about
Good luck and merry christmas