Mmm, this is a bad luck case isn't it? The agent had no choice but to split the booking: you can't mix travel classes for different passengers on one PNR. As a status passenger you can get free seat reservations for those travelling with you on the same PNR, but not for those not travelling with you. So the agent was correct in what they said to you. Your choices are to
- wait until you can upgrade the whole party to the higher class,
- to pay the £70 and regard that as just a part of the cost of travelling.
- somehow get at least bronze status for your MiL
- or wait until OLCI.
The latter isn't a bad option if MiL isn't a seasoned CW traveller. Though some seats are certainly better than others, I think it requires a degree of familiarity before the contempt falls in.