Yes I don't understand it but they have always kept them up that late, each to their own I guess.....
my children totally ignore my house rules about sleeping all night and not getting up before 430am...
Do you really not understand it? It seems super obvious to me. My 4yo goes to bed at 9-10pm and wakes up no earlier than 8.30-9.00am. That's his natural sleep cycle and it suits me infinitely more than him going to bed early and waking up at torture o'clock in the morning. It's a double win as it means we can be out and about all evening with no particular need to rush home and I can sleep until a normal time in the morning.
As to your aibu, you aren't being unreasonable to want a night of just adult company but you are being unreasonable to be so put out that that kind of night doesn't suit your friend. Your friend and her husband aren't even likely to kick back and enjoy a boozey dinner when there are good odds that they'll be going home to put a pair of toddlers to bed. It doesn't sound like the kind of evening that would be especially enjoyable for them and they'd just be expecting her mother to put herself out for something that neither of them would enjoy. Tbh you sound quite judgey about her parenting with your comments on her kids' bedtimes and only having her mother to babysit. That's preventing you from empathising with her position because instead of thinking, what I want won't really work for her, you seem to be thinking she should just adjust her wrong ways to suit you.
You also went about your plans very, very badly. If the text you posted here was verbatim, then it appears you had spent time working out when you were all free for dinner and made the invite first. Then after the invite was accepted you moved the goalposts by text and asked your friend to make arrangements that depend on someone else doing her a favour for something that she has no real interest in. You put her in a difficult position, tbh. If you wanted to arrange a childfree night that needed to be the opening suggestion in a face to face conversation. "Hey friend, I'd absolutely love an adult night of dinner and chat, do you think you and your DH would be interested in something like that?" Then she could either say, "Tbh, it's just not something we have much interest in at the moment." Or, "That could be good, lets try and arrange something." And you coudl start making plans from there.