If the family drama is true, then that is really sad. Entitled people are literally the worse and its a shame that they went through this when a wedding is supposed to be a special day. The grandfather taking sides and boycotting is such extreme behaviour
HOWEVER you can't say your having a child free wedding, then allow two guests to bring their babies and then make an exception for a third child. You are basically telling people "I care about this person more than you, so I will let them bring their baby". Also people will not understand why she can make an exception for one cousin's child but not another. Again you are telling people "this cousins child is more important than your child". I know this shouldn't matter, because obviously she is closer to her sister than her cousins, so more likely to make an exception for her niece, but if you make exceptions for one child, adults expect you to make the same exception for all children otherwise it "isn't fair"
Also she probably thought she was doing people a favour by saying she'd arrange free child care and accommodation. But that is telling people "I am so desperate to not have your child at my wedding, I am willing to PAY to keep them out of it". Like yes, people are going to be offended by the fact that you don't want to include their child and will kick up a fuss (and this is probably amplified more because its family-related.)
I only say this because I used to work in a primary school and know how parents can react when it comes to their children. I'm not saying the behaviour is justified, but I am not surprised that people didn't take it they way they wanted it either.