^yeah, 20K on renovations for a place you don't even own is insane.
What if the parents had
insisted on not taking any rent money from the couple? I understand and agree that the couple is pretty lucky that they didn't have to pay anything throughout the time they were living in the house, but shouldn't that be a separate issue from the $1000 they received as a wedding gift? Like the OP said, the parents held on to it because the bride and groom were busy. It was never intended for the in-laws to receive/keep in the first place.
And what was the mother-in-law's reason for taking out the wife's laundry? Did the entire household share a washer/dryer? If so, the wife needs to suck it up and be around to take out the laundry in time before the mother-in-law gets to it. That's just common sense.