Unfortunately that is how the system is. She is no longer part of your travelling party as far as the booking system is concerned, as she is on a separate booking. No airline as far as I know can keep non-identical itineraries on a single booking.

Your Silver benefit only extends to those in the same booking as you, and even the Gold TCP benefit only extends to those in the same cabin as you, so in this case it would not have worked for your MIL's CW sector anyway. Who paid for the booking is immaterial here, as it is not part of the BAEC benefit that the benefits of the person paying for the booking extends to the person flying.

Clearly, being seated together is not of paramount importance since MIL is now in a different cabin on one of the flights. So, if I were you, I'd either pay the seat fees or take the risk of not being seated together. Why not keep your wife and yourself together and if you prefer to give your seat to your MIL on non-upgraded sectors if they want to sit together but you can't seat all 3 of you together?