Good grief this thread is suffering from a serious lack of vipers 

Normally I'd agree a dp problem but op doesn't sound much better.
They TELL you when they're having YOUR children??! No.no no no no!
Honestly if I could no I'd send both you AND do on a week's assertiveness course asap!
DO NOT apologise, offer a shorter break, and DEFINITELY don't offer to cover the deposit.
"I'm sure pil it might have seemed a good idea at the time but really ANY plans involving mine and dps children must be run by us first before any firm plans are decided upon. This is not something we can agree to for the sake of the children mainly as they're nowhere near ready to be away from us for that long, particularly with you as you've not even ever had them for more than a few hours. We are also deeply uncomfortable at the idea of them being so far away from us for that length of time. We hope you enjoy the holiday very much but the children will not be going with you."
Don't justify, argue, defend or otherwise explain.
Wtf were they thinking ?! And the holiday they've chosen isn't even remotely suitable for children that age! Were they seriously expecting to keep them satisfied with what board games and walks!? Clueless!
My parents are in their 70s and my now ex in laws are
just worked out ex fil is 90 this year and mil will be 88 early next year. And even they know better than this! My mum has a running joke that when she wins the lottery (she's played every week since it started and never won more than a tenner
) that she's gonna take all the grandkids to disney and universal studios etc for a fortnight and make them show her how to play 'video games' really well so she can play online and trounce other teenagers, she also says if she wins the lottery after they're 21 she's going to take them to Vegas too clubbing and gambling she reckons she can do a "grannys six" (instead of oceans 11) and teach them all how to clean up at blackjack! 
Yes she's more than a bit nuts but point is she knows a famous five holiday minus the adventure of bad guys would go down like a lead weight!
As parents a key part of your job is to advocate for your children and to be perfectly honest it doesn't sound like you're doing that very well with your pil. It's going to get harder as they get older and particularly during the teen phase when they generally don't want to see grandparents at all and it becomes a duty to them to some degree, so you need to start now as you mean to go on.
I'd be nipping that nonsense of them telling you when they're having the dc in the holidays in the bud too. They need to be much more aware of the boundaries that you SHOULD have in place.