We have blended MgO nanoparticles with Poly (methyl methacrylate) thin films by solution casting method. MgO nanoparticles are doped in 5 wt %, 10 wt % and 15 wt % in PMMA film, and annealed for 02, 04, 06, 08, 10, 12, 14, 20, 24 and 28 hours at 130 0C. We have comprehensively investigated the molecular scale re-structuring and morphological evolution of the composite films and have accounted reasons based on the observations made on chemical bonding, crystallinity, bandgap, Urbach energy, and fluorescence and Raman spectra. We observe that the film loses its overall crytallinity in initial stages of annealing which latter improves slightly owing to the temperature induced limited diffusion of MgO QDs (sizes in the range of 7.0603 nm-9.5647 nm). The limited diffusion of MgO QDs allows for the formation of larger clusters, which in turn affects the local crystallinity of the composite films. We report local scale re-crystallization. We have discussed the role of competing forces. Evolution of nano-micro scale structures inside the films are governed by the reconciliation between inter and intra-molecular forces. The temperature of the film plays an intermediate role facilitating the whole process. To get molecular scale insights, we have estimated crystallinity, bandgap and Urbach energy of the pure and hybrid films. Dispersed MgO nanoparticles diffuse locally and nucleate to form larger spherical clusters. Anchoring of MgO nanoparticles on PMMA surface and vice-versa appears to provide thermal stability and mechanical strength to the nanocomposite films, as MgO nanoparticle doped PMMA film appears to form nano-micron-size particulates of PMMA. Contradictory to that, the overall crystallinity of the hybrid film drastically falls as the formation of boundaries, interfaces and voids overwhelms the whole process. Formation of larger nano-aggregates at latter stages of annealing slightly improves the crystallinity of the film. Estimation of bandgap and Urbach energy calculation confirm for the same. The micro-level phenomenological understanding of the diffusion process of nanodots in solid film atmosphere is technically important for ensuring the sustainability of such nanocomposites, which goes through a heating process.