how would you handle this?

I would say that you really don't need anything else at your house and though you appreciate what she is trying to do you would rather she didn't.  You would really just like her to come and spend time with you and your kids.

Hmm that sounds tough. Does your father-in-law do the same? Maybe have your husband tell her that they really don't need more things. That they have enough books, toys, clothes etc. And that they would enjoy it a lot more if they take her out for ice cream maybe. 

i would tell your MIL, "thank you, but your don't need to bring presents.  you visiting is more then enough."  if she does bring broken/stained junk to your home, politely say, "thank you." and take it straight to your room, where later you can throw it away without your child being upset.  there is not a reason why a child should be playing with toys that are broken.

my mother is not well off by any means, but insists on buying junk for my DD - it drives me crazy.  when i say junk, i mean toys that are easily broken from the Dollar Store or pointless items that hold candy come from the Dollar Store.

as much i as try to leave that crap at her home, it sometimes comes home with me.  i live in a much smaller house than my mother.  my secret - when no one is looking, i throw it out.  i just went through my DD's room and threw out a large black trash bag of toys that are missing parts, broken, or just plain taking up room. (and guess what - it was all from my mom and the dollar store.)

i tell my mom - don't buy that.  when she asks why, i tell her - because i don't need that junk in my house and you shouldn't be spending your money on that.  mom usually responds with, "it is just a dollar."  i much rather have her save her money and enjoy her grandchild.

my dad just brought over his mistress' (er, sorry girlfriend's) cabbage patch kids.  they are in nice condition, but, i don't have room for more dolls/stuffed animals.  i didn't have the heart to tell him that i didn't want it.  (DD was scared of them anyways.)  my DD doesn't see my dad much, so, i am little more hesitant to speak up against this stuff, because he is trying to be more involved.  he wasn't very involved at first. (long story, that is neither here nor there...)

i just wanted you to know that you are not the only one that is dealing with bad present giving.  it is difficult, but the more you see trash as trash, it is easier to get rid of it.

I can totally sympathise with you. All the time, my MIL gives my daughter gifts that are either clearly used, or from the Dollar Store. Don't get me wrong, I do buy her stickers, coloring books, and the odd toy from the Dollar Store, but lets get real. I hate when she gives her the cheap, gross chocolate and clothing. She is my MIL"s only grandchild, and she is definetly not hurting either.

The part that REALLY irks me, is that my daughter's birhtday is 6 days before Christmas. So last year she again gave her a bag full of Dollar Store crap for her birhtday, and then for Christmas gave her NOTHING!!!! Her explanation was "Well she just got  a bunch of stuff for her birthday". I was livid. Its not her fault that she was born so close tho Christmas first of all, and secondly, Christmas is Christmas.

I finally said something to my husband b/c he could tell how mad and hurt I was. But of course he's not going to say anything, he never does to his mom.  After tallking to my friends and family, they all agree that it is something that is very awkward to bring up to her. To be honest, the MIL is the one who look slike a fool giving these gifts. Next time she gives your daughter one of her "gifts", perhaps just brush it off.

My plan this year is to email her a list of gift ideas for my daughter and just leave it at that.

I'm sure others will have better advice but personally I'd say to her if she can't give SAFE gifts then you'd rather your child received no gifts at all.  Also, if she is going to be bringing your 3 yr old gifts and not the 9 month old then, again, you'd rather neither received gifts.  Obviously it's not as huge of a deal for a 9month old but as she gets older she will notice that she is being treated differently.  My whole life my grandfather favored my brother (still does) and although he doesn't mean to it is beyond obvious and has been since I was very young.  I wouldn't want either child to feel neglected by their grandparents.  But if you receive no gifts then your 3 yr old doesn't have to go through the trauma of having her 'brand new' (to her) toy being thrown away.