MIL is going to MIL so tell the hubby not to tell you what she says and when she does say something to you about it reply clearly w/ "this is about DD not SD" or "DD deserves to have her moments too" or even point blank "Stop comparing them please, we want all the children to have their own identities and moments" 

i think your DH needs to be a bit more mindful of what he shares with you.  I mean, clearly MIL thinks that her son is not focused enough on his older child.  You want him clearly focused on your children and your home.. and SD is expected to fit into that.. not that your home fits SD.  I'm sure that SD does feel a bit out of joint because she did have her father to herself for so long.. and she is immature.. it's not that she wants to see the relative fairness that younger kids have his time now.. she had the time before.  she is a young teen and self centric.. she is also being fed into this "daddy moved on with his new family".. by his mom, sister and her mother.  

I would ask him to not repeat things.. It's not unusual for people to turn reflections in on themselves.. and it doesnt mean that your kids are not individuals when someone makes a relation comment to someone else.. "just like their dad when he was that age.. etc.."  And.. the comments aren't being necessarily made to the kids themselves.. so your children are not really feeling that slight.. and honestly.. I think your MIL probably is not going to have the relationship wtih the younger kids due to the friction with you, dh and SD.  

So, live your life and raise your kids to be happy in your home..... ignore the MIL.. you know she has a bias.. so it is what it is... you can minimize contact with her... exclude her from shares of facebook etc... if you want.. 

If you find MIL is treating or saying things to your kids that are unkind... then you can cut her off from contact.

Delete her Facebook account and other social media accounts.  Do not call her.  Let DH handle her.   SD is DH child ,,it's his responsibility to raise her. Guide her ect.  When you married DH you knew he had SD. M and she will require time and energy.

This is a DH and MIL issue they need to figure out for themselves, unfortunately you and your children are just in the cross hairs of their toxic dynamic. 

MIL has decided it her life’s mission to remind her son that he is a failure as a parent in her eyes by passive aggressively making a point to bring up SD in every conversation.

Your DH choses to either ignore or engage in her bullshit because at the core of it he does feel guilt and has been bullied in to believing he is the villain.

The reality is DH and SD’s relationship has been poisoned by outside sources that even the strongest of relationships would have a hard time surviving.

 JustanotherSM17, I can relate to your disgust with your MIL’s behaviour since I was guilty of the same thing myself. My autistic nephew (Aspergers) developed a strong attachment to me, which is unusual for children on the spectrum. Because he insisted on visiting me, his mother brought him quite often and I saw him far more than my own grandchildren.

When my daughter arrived for a rare weekend with her 2 children, immediately after I’d spent a week with my nephew, I went on and on about my nephew’s recent successes in school and with his speech therapy. Finally, my daughter snapped and shouted that if I said one more damned thing about the nephew while ignoring my grandkids, she was leaving.

I truly did not realize what I’d been doing and how hurtful it must have been for my daughter and, probably, for the children. Having learned my lesson, the habitual yakking about my nephew screeched to a halt.

Hon, I think that your best course of action is to let your MIL know that (as Rags often insists) it’s your children’s turn to be little ones, deserving of their father’s time and attention, just as your SD had her turn when she was their ages. She also needs to be told that her obsessive comparisons between SD and your bios needs to stop; as you’ve stated, your children are their own people! Rather than do a slow burn over MIL’s compulsive conduct, it’s better to get the problem out in the open. If she’s offended, too damned bad! Maybe it’ll keep the hag away from your doorstep.

So stop biting your tongue and start jerking a knot in MIL's bladder control bloomers.

Tell her off and do it with clear consequences for her shit.  SD has had her turn being a little kid.  It is your kids's turn.  Since SD is now a teen, it is also time for her to bear appropriate consequences for her crap and it is long bast time for MIL to learn the pain she has earned.

Really, you avoid confronting MIL's manipulative bullshit and with that avoidance you are facilitating her crap. Stop enabling her shit and start shutting her down.  Call her out on her manipulation and give her clarity that if it happens again her relationship with you and your children is done.  She needs ot invest in a relationship with your children that has zero to do with SD.  Tell her that she mentions SD again at her own peril. Make sure her son, your DH, knows that his mother is on her last sliver of thin ice that will cost her any relationship with you or your children if she makes the mistake of violating the not one mention of SD mandate.

Be direct, be in her face, and take no prisoners. She has been holding your entire family hostage to SD your whole marriage. That has to end.  MIL is either a calming influence with focus on your kids independent of anything to do with SD, or she has zero place. No middle ground. Make sure DH knows that you are done with his mommy making him her pawn and that you will no longer tolerate either her manipulative crap or his need to keep his balls in mommy's purse..

IMHO of course.

Take care of you and your kids.

I get making sure all the kids are included but that's not your MIL job to be Disneyland Grand Vigilante 

Its yours and your husbands job 

If she feels divorced guilt she can take the SD for one on one girls time but instead of spending time with her granddaughter Shed rather complain about how you/your husband spend time with her. Screams hypocrisy and poking your nose where it doesn't belong  

Just let her know point blank "Look here Betty! You raised your kids how you saw fit ... NOW this is MY family and my husband and I will raise these kids how we see fit"

If she doesn't get the point after tell your husband that she will be blocked on everything until she learns to come correct. 

My question to you is Why and HOW does mil know so much about the goings on inside your life?