"Also, forget the legal implications for a moment, in the spirit of DBing do I stay or do I go? Is this a WAS using easy ammo to get rid of me?"

I think there might be some of that. She's using this as a reason...How could you not remember the threats? I mean, maybe she's making this up. Does your FIL say you said whatever you said? But the final decision is yours. If the situation is not making anything better, you might want to move out temporarily and try to mend things. But again, only you know, Andrew...