So sorry to hear about this!! IL's can be soo tough - as evidenced by the length of this thread.
My MIL was & I'm sure probably still is such a witch!!! My husband had been so twisted from growing up w/her & his alcoholic father that he just couldn't/wouldn't ever stand up to either one of them. He never wanted to see her, so he wouldn't, and then somehow it was my fault - never understood how that happened.
When I stood up to her (and my FIL) they "had a talk" w/my ex-husband and all was blamed on me (I wasn't included in the visit and my husband didn't have the stones to stand up for me)?!? They never helped w/our preemie son (we moved to FL to be near them - never will I do anything like THAT again, lived about 15 min. from them) so I was basically left alone as my ex travelled all the time.
Unfortunately, I had to "let my ex go" after our son was about 9 mos. old since I couldn't take it anymore. I tried to keep in touch w/her for my son's sake, but she's NEVER remembered his b'day, Christmas, ANYTHING, so I gave up after about a year. She did achieve her goal of breaking us up and has tried to do the same thing w/my ex and his 2nd wife. Thanks to my leaving him, his 2nd wife said she'd do the same thing and at least got him to move out of FL away from her tentacles - but the dysfunction lives on.
So - I don't know what to suggest in your case. I'd let my DH take the kids to see her w/o me. It's not worth your sanity to be treated as "not worthy" and I'm sure your kids pick up on that as well. I also wouldn't want my kids thinking something is "wrong with them" because your DH's family is so negative all the time.
Good luck how ever you decide to handle this!!! Sending you lots of

for whatever you do.
Jane