I hate to be the bad guy (I truly hope this works out for you), but if the local ordinances forbid the kind of living arrangement you have, you could be screwed.
The law is there likely to prevent the kind of "excess street parking" that the neighbors are complaining about, among other things. The local municipality has determined that they don't want that sort of situation going on, for whatever reasons, and they have that right (maybe). Ask any family living in Manayunk (trendy Philly neighborhood) and they will tell you that their property values are being supressed by the amount of rental properties in their neighborhood. Loud parties, slim parking places (complicated by the nightlife in the area), and other "less than neighborly" activities from the houses with a half dozen or more "transients" living in a house that don't care about the area since they aren't going to stay for the long term. As long as the landlord doesn't violate city ordinance, the only option the local residents have is to move. Every time ahouse goes empty, it becomes a new rental property. Downward spiral.
Not saying that you are doing any of those things, but the laws are there to keep that from happening and should be applied fairly to everyone. You actally pay taxes to have the local government enforce their laws, and unfortunately this time they are going against you. Democracy in action.
The "slack off on eviction" plan sounds great, except you will be in violation of the law whether or not your eviction of your tenants has gone through. I doubt the "but I can't evict them right now" argument would work as an excuse for violating that law. You didn't mention, what is the penalty for violating that law?
Just playing devil's advocate. I really do hope you can find a way to work this out with Laurel without getting fined or forced to sell. Sounds like you have a sweet house. Don't expect them to be too forgiving though. You are trying to upset their version of "the way life should be", and they probably aren't going to like that too much. You'd better talk to a lawyer.
