Thank you to everyone for your replies and well wishes. I am definitely more hopeful that DMIL's condition is only temporary and will improve with time. The only thing I can't understand is why none of her doctors/care-givers ever mentioned this condition to us. They have been first-hand witnesses to the drastic change in her behavior.
I'm so sorry your DMIL is going through this. You've gotten great advice. My mother had similar behaviors after bypass surgery, followed by every possible complication. DH and I walked into ICU to see her, and she was watching Baywatch. That sounds really snobby, but my mother wouldn't have been caught dead watching Baywatch, so it really startled me. I, on the other hand..... Later, after she had been moved to a regular room she was hallucinating. She thought one of my brothers was physically restraining her, and my other two brothers and my father were laughing about it. Turned out she wasn't getting enough oxygen. They moved her back to stepdown. So, that's another possible cause.
I'll keep your MIL in my thoughts. Hang in there.
Kathy