You're not over reacting - hell no!! Who gives chocolate to a 4 month old?!!
I feel your pain - a while ago I asked MIL not to give my son any M&Ms because they're hard and chokey. The silly ***** waited until he was in the kitchen behind my back and then gave them to him. Of course I knew about it because he bought them to me - grrrr. And this is the woman DH wants to hand my children over to for baby sitting!!!
She also does that horrible thing where they talk to the baby but it's directed at you too so I know how annoying it is - sometimes I feel like doing it back but nastier "oh is your stupid grandmother talking **** again?"

never mind me its been a bad week........

I totally agree that your ILs should respect your desicions even if they don't agree with them you're the Mum so you're in charge. Of course there is a place for grandparents to spoil thier grandchildren but not when it's undermining thier parents.