So, I have a teen, and two tweens, and I'm not following how not being allowed to go on a family vacation (punishment) has to do with bad grades, bad attitude, and laziness (crime). Shouldn't the punishment fit the crime and make sense so as to change the behavior?
So, in this case, the behaviors that need to be changed are habits that have been allowed to happen for 8 years. Since he was...9? The very beginning age of tween-hood? A VERY parent-controllable age, and kids at 9 (my youngest's age right now) are still very much willing to model good behavior and eagerly accept rewards to modify their behavior. What has happened in the past 8 years as far as discipline? This seems like a FAMILY problem, not a single-kid problem.
My oldest is trying...god knows we have had some crazy fights and sometimes it takes all I have to not scream at him, or just walk away and give up. And, when he being his difficult, nothing-is-good-enough self I think that the last thing I want to do is spend MY time and money to take him somewhere awesome. So I get it...I really do.
BUT....I also take personal responsibility for his behavior (after all, I raised him), his attitude and personality (much like me, he is!), and remember that as much as he is killing me sometimes, the last thing he needs to is to feel alienated from our family. I have no problem taking away Beats or phones or x-boxes, or making him do extra chores or being grounded from his friends, but home and family are always going to be the places where he is going to be loved and welcomed.
I'm not one to excuse bad behavior and I *am* one for owning and taking responsibility, so I am not by any means saying that your son should not be disciplined for not helping or being lazy, but it sounds like somewhere along the line the discipline (root word of discipline means "to teach or guide") was dropped along the way. At 17, I completely agree that he should be taking more responsibility for his own actions, but I am not sure that being excluded from a family vacation is the right way to teach or guide him in the direction you want him to go.
When DS is at his worst, and a 15 year old boy can be pretty bad, I try (if I remember in the midst of being so angry at him!) to take a step back and figure out what is behind his attitude or negativity. My DS doesn't handle change or stress very well, and it mostly comes out in the form of being nasty and snarky at me. If it starts happening for no real reason (meaning: nothing I did or said should have egged him on, or it comes out of the blue) I ask him what is going on. 9 times out of 10, there is something that is bothering him. He still isn't allowed to be a jerk to me no matter what, but if I know (or he knows) what is causing the attitude, we can work through it. Sometimes (like once a week or two) when I see him in his room alone, I will go in and lay down on his bed and just listen. He talks about everything he wants to, and I stay quiet so I can read between the lines to help me understand him better.
Chores - my DS hates doing chores too, and complains and cries about it, but we have established some chores that he and he alone is responsible for at all times, so when the garbage is full, for instance, he automatically knows that he is the one to take it out. It cuts down on the hostility I get when I have to keep telling him over and over again. And the benefit of taking it out outweighs the crap he has to go through if he just ignores it....we pile it up really high and then might (lol) go as far as throwing really gross stuff like cold bacon grease or last night's roasted chicken carcass right on top so he has to actually TOUCH it (ewww!!! yes, I love to torture my kids....

And if that doesn't work, the garbage can goes right into DS's bedroom as a reminder that it didn't get taken out. Only had to do that once....LOL
I understand that your DS is a few years closer to adulthood and it becomes a little different at that age, but he is still your "child", so you still get to make the rules! I don't know what the answer is for your situation because everyone is so different, but something tells me that excluding him won't help...he needs a different kind of discipline (teaching or guidance) and it will take hard work trying to figure it out.
In the meantime, the bigger issue is getting his grades up so he can graduate! I'm not sure by your post if he is a Junior or a Senior (if he is a senior, you will have to act immediately!), but I would start by contacting his school counselor and meeting with your son and the counselor to come up with a plan on how this is going to play out.
And as far as your MIL....she really doesn't have a say in this, so don't worry about it....
Good luck OP...these decisions are not easy!