Cheryl,
Do you think your father-in-law is competent to understand what's wrong with him from the explanations his doctor, you, and your husband give him? Do you think he's making rational decisions consistent with his personality from before he was diagnosed? Or is he acting differently from his old self?
If he knows what he's doing and wants to call the shots, respecting his decision may be a hard choice but the right choice. But if he's been incorrectly told that it's hopeless and has given up, you and your husband could let him know what's going on and what you and your husband think makes sense, e.g., transfusions so he'll feel better and be safer or getting a second opinion if you can arrange it.
If you want more information yourself, without having to rely on his doctor, contact the
Aplastic Anemia & MDS International Foundation and get their free MDS booklet. You can also download
Understanding MDS: A Patient Handbook from the MDS Foundation (220K PDF).