] We see Mrs. Musgrove having loved him, of course; we see her also remembering very selectively his life, and imposing her own unrealistic reflections upon those around her.

I agree with this. I'm sure Mrs. Musgrove loved Dick, but I'm also sure it was a relief to her to have him out of the house. This passage is more about the absurdity of human nature than about being cruel. It's that whole speaking no ill of the dead thing - the dead's faults are forgotten, the nastier bits of thier personality are glossed over. Austen points this out, reminds us what Dick was really like - she does not have a mother's love to gloss it over! - and makes a joke out of Mrs. Musgrove's over the top tendencies. I mean, there's speaking no ill of the dead, and then there's willfull blindness and delusion. This quote just slays me:

"Ah! Miss Anne, if it had pleased Heaven to spare my poor son, I dare say he would have been just such another by this time." (ch.8)