The question "What did you do with my gift?" is not going to be a pleasant conversation if you directly contradicted the gift-givers request. You should weigh the impact of ignoring their request - it might make more sense to follow their request for retirement investing rather than paying down debt. The optimal choice for $10,000 may be different from the best way to deal with your in-laws.
Speaking of free money, your first priority should always be investing in 401k matching, if any. If your company gives you free money for contributing to a 401k, take that gift first. Even credit card interest rates can't overcome the benefit of 401k matching (50%-100% on your contributed money).
Something else to consider: the maximum gift that the IRS allows without tax implications is $14,000. Your in-laws might be rounding down to $10,000 and waiting until next year to see if they should contribute more. If you're feeling cheeky, you could point out two things: the gift limit is $14,000... and it applies individual to individual. The mom can give you $14000 and another $14000 to your husband. The dad can do the same, for another $28000 and a total of $56,000 per year for one couple transferring money to another couple. It's a bit rude to mention it - but if they ever mention the limits of the gift tax, maybe it's worth knowing it.