Don't invite them for this. Have them come the day before or the day afterwards for a special family party where MIL will get lots of attention, get to see the kids playing with her gifts, and so on. Your husband isn't going to step up on this, you say, so it's all going to fall on your shoulders in terms of planning, supervision, organization, and justification. Sounds like a huge burden!
And I think you should re-think the size of the pool party anyway, both from a cost and a safety perspective. You will need a lifeguard for every 5 kids - that is a huge amount. Will there be other people in the pool at that time?? Not all 5 and 7 year olds can swim well, and a lot of parents are going to have a really hard time allowing their kids there unsupervised. Two entire classes? Are you sure you really want to do this? Do you really want each of your kids to get 25 presents apiece??? And do you want to spend the next year ferrying each of them to 25 additional parties each?
Kids need to learn to make choices and that they can't always have everything they want. They'll have much more fun with a manageable group of guests who are easier to motivate into the games, and there won't be so much competition and chaos. And the bigger this party is, the madder MIL will get, so scaling it back has a lot of advantages!
Tell MIL and the others that you want special time with them rather than having them in a noisy highly-chlorinated atmosphere. And that's if you tell them anything at all - just invite them to THEIR party and don't tell them everything else about the other event. One of the kids will probably spill the beans, but if you don't pump the kids up too much about a party for 40 kids in the water, and you "push" the Grandma event, everyone will do well!