I'm sure it's a regional thing the pay - but around here (MD) for in-home day care , it STARTS at $100 a day. No way I would do that for free. You have to be there for her - you can't just pick up and decide to go somewhere for a long weekend or something similar when you are obligated to be there for her so she can get to work. Even though your kids play, and he would be probably be there anyway for some of the time, you are now responsible for him and that adds a new stress. You might get tired of having him, and being compensated for the time definitely helps if that happens.
I used to be the only stay-at-home mom on my block, and if the schools closed early for snow or something - I was the one that they all walked home to until their parents returned from work. I didn't mind helping out every once in a while for my neighbors...but one winter we were pelted with a blizzard right after a blizzard and had an unusual amount of time off from school....everyone just assumed that it was no problem for me to watch their kids, since I was home anyway. It drove me CRAZY! I was not able to enjoy the time off with my kids. The kids expected me to entertain them daily with trips to go sledding etc. I didn't feel like it every day. And the thing that really got me was all of their parents were out MAKING MONEY. I kept thinking - I could get a job and be out making money, but I don't because I want to be home with my kids...(not the neighborhoods kids) MY kids. It burned me up.
For an entire summer, you should definitely take some compensation...enough to make you not feel used at times when the kid is on you nerves. (I think this would be more than $25 a day - at least $75) Or else, tell her you are afraid that you are not able to handle it and she should find someone else. If you are still collecting disability, I would think you are still limited in what you can do...or else you would not be able to collect.