I agree with PP, this is unfortunately where you decide whether you raise your children in the belief that MiL's feelings, wants and needs are paramount and they need to get with the enabling programme
^^ This 
But when you see the warp speed at which your DCs internalised your MIL's desires and then re-presented them as their own, I think that's a very vivid illustration of how difficult it is for adult men who have been very effectively conditioned throughout their own childhood to suddenly rethink how they characterise their mother's behaviour
YY
you owe it to your family to grow a bit of a spine about this, however much you end up having to be the bad guy as a result, and however much you feel it 'should' be your DH doing the heavy lifting. It's all very well not to rock the boat in situations where it's only you, the DIL, who are getting the muddy end of the stick, but now that your children are being affected, surely it makes it easier to do what's necessary?
But muddy end of stick often goes far further than that esp if Mils dh enables her and is going at it gung ho for an easy life.
Muddy stick can mean wider family are cut off from the DC as mil might force the only contact through themselves eg, other family members arrange to meet one, and then suddenly plans are cancelled and have to go through MIL etc and meet at mils house, so dc - miss out on wider family as well as the dh.
Its easier to do if you have a larger family on both sides but sometimes, its not that easy.
OP I really really feel for you and I get this all the bleedin time from MIL, ONCE poor dd ran out saying " leave me alone, stop it" in fact they have just stayed with them for three days and nights and they still came round a week later treating us like we cut them off from their GC. Its maddening, Mil uses emotional black mail and looks at me - like I am the one who makes older dd not want to go there when its her bloody behaviour.
Its a fucking nightmare situation, and yet - I would love it if Mil was a normal warm lovely person but she just isnt she is a night mare.