OP,
You really are in a bind....
You have three possible options...
1. Continue to pay your mother, and let this all fester and burn...
2. Make your excuses to your mother, and 'seeing that she is happy to help your brother and sister in law out, blah, blah, blah....'.
3. Find other child care
The problem with finding other child care... While it kind of removes you from the immediate situation, it would very much exacerbate the whole issue.... Your mother, Brother, SIL, and their kids, will be like the happy little clique, with your mother being just so much closer to them and showing even more and more favoritism... and you will be the 'outsider' (very painful and hurtful.....)
My first approach would be to call my mothers bluff, with the approach I must mentioned.....
Then, it it her call.... If her decision is to actually continue to demand payment from you and not your brother, you will have to decide how you want to react... Either you can continue with the festering and resentment, or you can decide that you just cannot accept this treatment, and pull away, find other child care, etc...
I can say, once again, what I have posted several other times here on the DIS.... Grandma providing professional/business childcare for a working parent is a two edged sword.... In many cases, it is not the perfect little situation that many think it is all cracked up to be.
This is my fear as well and I have considered that.
I agree having Grandma watch the kids has its ups and downs.