Good grief, are you secretly me?
I'm so sorry you are in this situation, I have virtually the identical thing going on with my FIL and MIL and it is really, really grim.
(With them it is the bathroom that can't be fixed apparently so therefore they can never sell and get a more suitable place- when we go round there we can't even go to the loo...seven months and counting...)
My FIL is the most controlling person I have ever met and his behaviour drives me bonkers, particularly the treatment of my MIL.
The thing I have come to accept, however, is that although her life is desperately sad, she has been in that marriage for 40 years, 30 before I met her, and his controlling treatment has been enabled ALL that time in this role by his family.
From your post I would imagine it is the same- it is a bit unfair to expect you to be the one to try and resolve this as the rest of the family have allowed it to continue for many years.
For your own sanity, I think you have to realise that MIL has chosen this life and you can't save her from it, no matter how absolutely bonkers it all is.
I now detach as much as I can and give them honest feedback about their behaviour but don't engage:
"It makes me so sad that you choose to live like this. I would love to help you get a plumber in and sort this out "
FIL "Well, what you don't understand is... (5 minutes of random rubbish about some nonsense like we can't trust plumbers not to steal/these new regulations aren't proper they might come in and flood the place etc etc)
me "Well, it makes me very sad that you think that. If you want to get a plumber in let me know"
FIL "Well we can't because (another 5 minutes of catastrophising)
And so on. It isn't fun. But it keeps me sane.