I can't imagine anyone having to discuss their porn-watching habits with their parents/siblings-in-law. Talk about awkward. This definitely sounds like a situation where you should have discussed and solved the issue between the both of you, as it's a rather private matter. Or, at least, speaking to your family should have been a last resort.
For the record, I entirely agree with you. I'm not sure where I'd stand on a husband/wife watching porn, but I definitely don't think it's appropriate to do so while they're watching their 2 year old child.