What can I do about my mother in law showing favoritism between grandchildren? ?

By the time your daughter is old enough to understand what's going on, the other granddaughter will be older and have her own life and possibly family. She will not be spending as much time with the MIL, and then she will probably want to come around your child more. The MIL has already bonded with the 17 yr old. You and your husband can give your daughter everything she needs and more!