You disregard that and instead decide that I "do not enjoy feeling guilty" and further, I lack the self-awareness to make this choice on a "conscious, purposeful level."

It's like you have five interpretations of everything I say, and are just determined to pick the one that is the most insulting to you, and then frame it as what I actually said. Why do you enjoy doing this so much?

From an emotional standpoint, however, my mother-in-law either loses or wins.

That depends on when you choose to end the story.

If you end it in the moments after you tell her how much her sweaters suck, then sure. However:

You don't think it is possible that immediate pain would give way to eventual (but far greater) pleasure, when she no longer is a bad knitter, or has, instead, found something she really is good at? You don't think it's possible that she may eventually, at some point down the road, come to thank you for setting her straight, and bond with you more securely due to your honesty?

If not, then... well, that's interesting, I guess.

You are, again, wrong.

Yes yes, I know how much you enjoy saying that. Good on you, here's some more internet points. Gotta admit, though, I am surprised you are so ready after such a relatively short cool-down period.