Toddler eats little. Pediatrician said healthy, weight not an issue motherinlaw gives iron, won't listen, wants her fatter. Dangers, concerns?

You are parent. You or your husband need to put your foot down with this woman without exception. It is up to you, in consultation with your pediatrician, to decide what is healthy for your child. Older generations felt "fat was better". That meant people had enough wealth for food, etc. Food was given for love/affection (we still give chocolate on valentine's). If you don't want obese child at 5, nip it now!
Nutrition! Focus on what your child eats and drinks and a regular eating schedule/pattern. If she is not anemic and eats iron rich foods: chicken, meat, fish, beans, green and leafy vegetables, then she doesn't need supplemental iron. Avoid juice, sugary foods and fried foods. These will discourage her from taking healthier options. Perhaps mother-in-law could go with you to next doctor visit for reassurance.