What would of been the proper way to handle my tax situation in 2007?

I was married at the end of 2007 so on my tax return we filed married filing jointly. Today I found out that my wife's parents claimed her on their 07 tax return. I know there is no way to amend the return (cant switch from MFJ to MFS, etc) But are my parents n law even allowed to claim her as a dependent since she is married? If we didn't file mfj we would of lost the full tax rebate and we would of lost the education credit. Any insight to this situation would be greatly appreciated.