Should we let her be disappointed on her own? Or should be accompany her?

I think contacting the priest, or his office, and asking him to clarify the situation for your MIL is the best idea. He may, while he's at it, be able to offer her some good counsel and comfort. Poor lady.

I would think this was a sign of early dementia. It does not make sense that it would be for her husband and a competent person would realize that they would include her in plans. She may be extremely upset IF she figures it out. If she expects to be the grieving widow and is denied sitting there with the family, she may even come to the conclusion that her husband was a bigamist! Her mind is not drawing logical conclusions.
Can you ask the priest to talk to her on the phone to prevent this from happening? He can tell her that he was calling to let her know this was for another parishioner with the same name as her husband, and he knew that would be confusing, but he wants to avoid any embarrassment by letting her know ahead of time.
In the mean time, throw away the newsletter, cross it off the calendar, and maybe she will forget the date! If she does not, you can use what is called "therapeutic lying" and tell her her husband's service was cancelled, that someone called to tell you this morning before she left. This prevents her from being hurt spiritually and emotionally, and is the merciful thing to do. It is a form of "therapy" or treatment for demented people, and I believe God is pleased when we protect our elders instead of letting the chips fall where they may.
In other news, your MIL does not need to be driving if she makes such poor decisions. Contact her doc and ask him to trigger a notice to the driver license bureau. They usually send a letter asking the person to get an assessment from a doc in order to keep their license. Doc can then ask the appropriate questions and see about an early diagnosis of dementia when it can be treated and progression slowed.

Oh! Thank you for this perspective. I was thinking in the realm of "should" and didn't think about *his* emotional boundaries, and you are very right about that. Thank you again. She can deal with this impact on her own, and then we will deal with whatever falls out later.

Tell her to call the parish house and verify who it is for. If she can drive that far, she can go on her own. Support your husband's choice, he may suspect she is going to put on her drama queen crown. He has created a boundary to protect himself from trauma and emotional distress. Try to respect his choice.