I think there IS a point to what you say OP, somehow. I think you DO have boundaries, and the kids learn to understand your point of view when you talk to them.
what initially concerned me was that you just let them off with everything, but you don't. I think there IS scope to show them you are displeased with their behaviour so that they do feel some sense of action/reaction.
A friend once said to me 'We discipline them because we love them' Your style IS still discipline, albeit softer than some. All kids are different and actually a good talking to can be as effective if not more than losing one's temper. That said, I don't think it does (some) kids any harm at all to see when they have absolutely contravened a clearly stated boundary and that you're very angry/let down as a result.
Your MIL was abusive to your DP to the point that he wants little to do with her and your kids aren't left with her. Be strong with this woman and call her out!
"MIL, We are all WELL aware of your 'techniques' to make kids do what you want them to do, and I deal with the fall out of your treatment of DP on a daily basis. What you did to him won't be done to OUR kids. DON'T even think about shouting at my children, you don't have the right or need to disipline them. If you have a problem with this, I guess we'll all be seeing a lot less of you. My house, My Kids, MY rules.'
I fucking hate bullies.
Would your DP honestly prefer to be no contact with his mother? if so, take his lead and keep her far from you all.