Well currently I don't have an extended family (one of the perks of divorce) and my sister quilts herself so would never get a request from her.
However I did think of two responses, not sure which one I would use...depends on if good/bad relationship with sister in law
1. Go find a pattern, buy your fabric and you can come over and I'll help you learn to quilt. Then you would either have a quilting "buddy" or she would shut up fast.
2. You could find a pretty (simple) mini quilt pattern or simply a single block pattern for her to hang on her wall - nothing says you have to give a bed size quilt to someone. If she still "whines" say "the size of the quilt has nothing to do with how much I love you, I just don't have time or money to make bed size quilts for all."