The only thing that may happen is that the parents will notice and complain to your boss. But, you should not get into any kind of legal trouble because of what you did.
Your daycare center could get in trouble, though... 14 children in that age group puts you over legal quota... By law you can...
I would look around and see if any of your friends or family members are good photographers. My husband and I ended up hiring one of our friends who was an amateur photographer, but had done some other weddings for fun. He did everything for about $400, and did a wonderful job!
You could always have 2 flower girls. I did at my wedding. That way you could have peace with the in-laws and still have the little girl that you originally asked be happy, too.
However, if you don't want two flower girls, then I would go ahead and tell you fiance that he needs to tell his...
People weren't chatting during these things at my wedding, but I have been at several weddings where they were talking. I also find it weird and rude that people chat during these special dances.