Was your FIL's sister always like this or has this started since she had the brain tumour. I think there lies your answer. If it was before the tumour, it seems that she may well be a vile woman anyway, but if it has been since the tumour, then that's a different kettle of fish altogether.
It's fine understanding the possible causes of a personality change, and it certainly goes some way to understanding why the person acts the way they do, but that doesn't mean that the horrid behaviour is any less horrid to anyone on the receiving end, just that there is a reason behind it.
No-one should be expected to put up with any sort of nasty words or actions, regardless of the cause. OP, by all means call your AIL out on her not-so-great behaviour, otherwise she's not going to learn what is acceptable to others. Even after a brain tumour, people can learn and re-learn things, so it may not be beyond her to understand that you will not accept her acting in a vile manner to yourself, FIL, your DH, your DC or anyone else. TBH, I'm not sure what you should do about her husband. Maybe do the same for him so he realises that you won't accept his behaviour regardless of the root cause.
So sorry to hear about your dad. I can understand how raw you must be from his death and the circumstances surrounding it. Just be kind to yourself for a while, it sounds as if you have enough to deal with ATM, without other folk adding to it.
Take care and all the best 
