I think I'm going to have an unpopular opinion here, but have you considered redoing your budget? This sounds to me like an issue of wants vs wants, not needs vs. wants. Maybe your kids would appreciate more gifts at Christmas and a trip to WDW vs. a
Disney Cruise. I've never taken a
DCL Cruise with my family because the cost of that over any other cruise, or a trip to WDW is significant.
I'm just a little surprised by all of the responses here calling the in-laws extravagant and selfish. But, your money is going on a Disney Cruise, it's not like you're scraping to afford gifts for your kids. As some one who probably spends more on my kids at Christmas, and takes less lavish vacations, I can see that the position you put them in is just as uncomfortable as the position they put you in. But it's family, and it would be a shame to give up a family holiday tradition just because you choose to spend your money differently. In their mind, you probably could afford to spend what they spend, so they don't feel bad, and aren't going to not get their kids what they want just because you chose to limit it. They probably feel bad about your kids lean gifts like you feel bad about their kids never going to Disney.
Whatever you decide is ultimately up to you and your husband, as it's your personal finances. It just seems like this is causing you great stress, as you're already dreading Christmas when it's April. Don't get me wrong, I highly value our family vacations too, I just think there's another side to this whole thing here.