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The more I've gone through with my parents, my dad especially, the more I sympathize with allowing them to move to hospice/palliative care if that is what they wish. I'm also developing permanent aches and pains at age 56 and can only imagine how unhappy I might feel at age 80 or 90 if my senses fail and my body is so limited that I can't do much of anything any more.
Sometimes we think that we children should be able to provide enough happiness to make even the poorest quality of life worthwhile for our parents, but I think we assume too much. Their pride can make them feel embarrassed to be around us in their diminished condition.
Only you can tell whether the depression is a phase that can be improved, but my personal feeling has evolved to a point where I'm not sure using anti-depressant medication is the right thing to do in all cases. Sometimes, people are depressed because they are just very aware of the truth that things are going downhill and will never get better. I don't necessarily think they should be medicated out of that. I think this is the time when you honor their wishes and give them as much love and attention, and as little nagging and forcing of medication and food, as you possibly can.
I hope I don't seem like a doomsayer, but the fact is that we don't live forever. I don't think that forcing someone else's life -against their wishes- to last longer than the quality of their life and comfort is in their best interest. We all fear dying, but we also fear pain, tedium, and becoming a burden.
If the family really isn't ready to allow palliative care, you should meet with MIL's doctor and discuss her condition and prospects for improvement. As far as I know, she can move out of hospice if her health and/or attitude improve.
My mantra since the passing of my father is- when you are elderly, there are worse things than dying.
Best wishes to you and your family.