There's other Terrys on 1861 also described as inlaw - although no obvious parents/step-parents in sight! Here's 1851. Siblings match 1861
Colwick St, Nottingham
Agnes Terrey    35    b Yorkshire. Widow, dress maker
Mary Terrey   10    
Eliza Terrey   7    
Frances Terrey   4    
Charles Terrey    2    
Agnes Terrey   7 Mo    
This fits as there are also Smallwood children in the 1861 household
Agnes Terry, age 37, widow
Father Thomas Lowde, FWK
Thomas Smallwood, 37, widower, shoemaker
Father  Wiliam, Smallwood, trimmer
Marriage    12 Jul 1852,  St. John the Baptist, Beeston