Wow, that's a tough situation, and I don't really have the best answer for you. Of your suggestions I like the third one best, that way the money goes back to him in a way and he doens't have to feel awkward about the situation. Hopefully your brother in law can offer some perspectives on his personality. I suppose if you were to give some back, $20 might be a nice nuetral compromise, it's basically half and a much more reasonable amount. Good luck!
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"The world is so exquisite with so much love and moral depth, that there is no reason to deceive ourselves with pretty stories for which there’s little good evidence. Far better it seems to me, in our vulnerability, is to look death in the eye and to be grateful every day for the brief but magnificent opportunity that life provides"
-Carl Sagan
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