Nellie - welcome to Talking Point.
Has your MIL always been, how can I put this nicely?, a bit manipulative? Because it does sound that she's trying to exercise as much control as she can over her own environment and you. I do think that sometimes, dementia can cause people to become "more so" if you see what I mean. I think you're caught between a rock and a very hard place. If she doesn't eat then the diabetes will kick in and the dementia will get worse. However, in truth, when you're elderly with dementia, eating might be one of your few pleasures so to eat something you don't like seems pretty hard. I think there's probably little point in playing the "if you don't eat you'll have to go into a care home card" because logic doesn't come into dementia. She may respond as if it does, but that doesn't mean it does. Would she starve herself if given appropriate food even if it's stuff she doesn't like? Probably not, but as I said, food might be one of her few pleasures. However, I don't see why you have to be run ragged catering to her whims. Could you not prepare some individually plated meals and freeze them for days when you're having pasts or something? Or even buy them? I don't think you should get wrapped up with the concept of providing a home cooked meal every night.
Best wishes