I'm so sorry to hear about your mother in law. Cancer is such a hard way to go, for both the person ill as well as their family. My prayers are with you.
As to your question... do you think it is possible that she has entered into a "fear period"? Occasionally dogs go through these (I think there are normally at least two in a puppies life, although I forget the time frames for these) But perhaps your mil's death so happened to precede, or possibly initiated, this fear period. Admittedly, I'm no expert, but I seem to recall that these times are characterized by new and intense fears to objects or places that were previously benign... but that the period passes fairly quickly. It sound like that may be what's going on, and if that is the case, then just wait it out, crate her with the other dog for now, and be VERY careful that you don't by word or action give her any reason to think that her fear is a valid one (i.e. baby/soothe her when she is in that anxious/fearful state) as that might only make it a more long lasting issue.
Good luck with your baby, and may God be with you and your entire family right now.