Ms MacDonald, a friend of 75-year-old cleric, said if the reports were true then the Vatican’s position showed “a lack of charity”.
The cardinal was last week seen moving his possessions from his former residence in Edinburgh to a church property in Dunbar where, he said, he intended to settle.
It was the first time he had been seen in public since February when he was ordered by Pope Benedict XVI to step down after allegations emerged of his relations with a priest in Aberdeen and four priests in the diocese of Edinburgh and St Andrews.
However, at the weekend it was reported that the Vatican had told the cardinal to shelve his plans to relocate to the East Lothian town, indicating that his plans to remain in the UK could further undermine the reputation of the Catholic Church in Scotland.
“If this is true, it shows a lack of charity by the Church,” Ms MacDonald said.
“Part of Christian doctrine says that sinners shall be allowed to repent, and in my understanding is that he has repented. He has lost his career, he has lost his reputation, and he apologised for everything. I don’t know what more he can do.
“If he is as welcome by the congregation in Dunbar as he seems to be, he should be allowed to retire there.”
Ms MacDonald also said that she was considering sending a letter to the papal nuncio, Archbishop Antonio Mennini – the Pope’s permanent diplomatic representative in the UK – to express her support for the cardinal.
Describing the him as a “very decent, good man” she said that she would be writing as somebody who appreciated all the excellent work he had done.
Ms MacDonald added that although she had not been in touch with the churchman recently, she would consult with him before writing.
She added, though, that she felt to pursue a strategy of ordering the cardinal to leave could be damaging for the Church, and did not feel that allowing him to remain would have any measurable negative effect on its standing in Scotland.
“It may be they’re feeling wounded, embarrassed and let down, all these things as individual, practising Catholics, and they’re entitled to feel like that,” she said.
“But there are others who will say that he was one Catholic among many, he might have been first among equals, but he was not the Church.”
When asked if she thought the cardinal would obey the order to leave, Ms MacDonald said: “He’s very much a man of the Church and he will weigh up if its valid, and what it says about the loss to the Church of membership and support that his actions caused.”