I pretty much agree with what everyone is saying. Just to add, I think a lot of times people don't differentiate between announcing an engagement and actually inviting people to the wedding. I think they feel they have to send out invitations to everyone they know, even if your dream is to have a small wedding. But it's a destination wedding and if you want a small wedding, then your FI needs to explain to her that that's what you guys truly want.
My FMIL was trying to add some people to our guest list, just like you, people we'd never met or only met once. But she wasn't a jerk about it at all & the FI just explained how the venue would charge us more money for 50+ people, other costs would increase, etc. and she was very nice about it.
Sorry you're going through all this..I hope it gets better!