Grrrrr to your MIL! Your DD is being perfectly normal and how fantastic are her night sleeps?!

All babies sleep in cycles, usually about 40 minutes (give or take) in length. Some babies don't know how to put themselves back to sleep after one cycle (both my DS's woke at 40 minutes during the day), this usually begins around 2-3 months of age. So it has NOTHING to do with your milk supply, it's just how babies are neurologically made up.

You sound like you are doing a great job