None of this was in the original scenario. You're simply inventing your own justification for invalidating a player ability.
How much did the Duke's men want to find the characters? I don't remember the description saying. Apparently not enough to find them in the first 8 hours - but enough that the party felt it necessary to hide.
Expecting the villagers to hide the party indefinitely if the Duke really wants them seems bizarre - if he really wants them, wouldn't Duke presumably start pressuring his men who will start pressuring the guards.
Anyone can do that. I can GM this game and have anything I like happen. The question is not 'Can the GM make what they want to happen?', the question is 'How can the players?'
Maybe the DM was going to railroad the players in this case no matter what. Maybe the DM pictured the plan as not particularly safe and so decided to have them show up. (And if so, signalling something about that would have been something I would have done).
What resources do the players have to prevent being found and surrounded which don't require the GMs permission? Where is the non Mother May I option?
The GM in D&D seems to always have the ability to screw the players by the rules. A decent GM will presumably not do that maliciously at all, and not accidentally very much. I'm guessing having something more than "The villagers like me so I'll trust them to hide me in the barn" could be supplemented by making sure they covered their tracks heading to the barn, leaving the village and circling around in case there is a spy on the village, set up a warning system, pick a barn with an escape tunnel, get up and leave before sunrise, etc... If the DM is a jerk it probably wouldn't matter. If they had written down "villager 3 is a spy" then something seems likely to be needed.
You sidestepped there. If the Duke's men are scowling, why bother hiding? By your arguments, if you actually want to hide from something, it's too big a threat for Rustic Hospitality to not void itself. That's not a strong argument.
I don't think I sidestepped it. (I elaborate above). It kind of feels like several posters on here want Rustic Hospitality to be a carte blanche get out of jail card if I read it uncharitably. I assume that's not what was meant.
So, under what conditions would you have allowed the guards to locate the party by morning?
. This means that use of tge ability is entirely gated behind the GM's agreement to let it happen, and only to whatever extent the GM wants it to happen, turning this ability into an ask of the GM for permission to deploy it. That's MMI.
And so again, it sounds like you want it to be a get out of jail card and for the party members to have complete knowledge. I assume, given you play 5e, that that isn't what you meant.
And might well not be a problem or issue for a table. MMI isn't about liking what happens or not -- the children's gane doesn't change to a different thing if you like playing it or not -- but about how authority over the fiction is apportioned. That can be fun and good for one table and bad fir another with exactly that same fact pattern in play. Insisting that MMI only be negative is silly. It's not only negative. But like all things, if you don't like how play is happening, you're much more likely to call it out. The claim MMI is only negative is survivor bias.
Some people clearly find the term MMI pejorative, and to be applied overly broadly by some in here. To dismiss that out of hand seems just as odd as others dismissing that some apparently don't see it as a negative.