Money is never just money when it is gifted. It is also symbolic; sometimes of how much the giver values the receiver, sometimes how much guilt the giver feels, sometimes how much control they exert (and a whole lot of other things). It is always more than just money, it has a lot of baggage around it too.
OP, you're hurt because to you it shows that your PIL do not value your children. Given that your wedding present, a cheque, mysteriously vanished back into their pockets, I'd suggest that to the PIL, money symbolises control, not affection. Having inherited so much, they do not have a healthy relationship with money (or their children, it would seem).
I think your PIL are playing a rather nasty game. "We're very involved with them ... They aren't hugely close with dh's brother and wife." They're trying to buy your BIL/SIL but have decided they don't have to pay for you, you're 'free' (what the rest of us would call normal and loving). Money is used to control and gain access to the others.
I think you need to have a discussion with them. I think your DH preferably, or you, need to tell them that you are hurt and bewildered by their treatment of you and the children. That you cannot understand why they took their wedding present back (yes, you need to raise that too, it's part of the problem) and why they are choosing to treat the three youngest children differently from the others. That when they are old enough to notice your PILs preferential treatment of their older siblings/cousins and ask you about it, you will not be able to answer because you do not know. And that the children will think that their grandparents love them less.
I would not have them for Christmas. It would make for a very awkward day, and not at all nice for the children. I'm sure they will be able to make alternate plans. And it will give them a chance to look at themselves v(although I doubt they will).