Hi OP I am sorry for this situation and I don't think you will like my thoughts, but here we go.
I think IMHO that you need to be careful here how you speak to your inlaws about this incident. You are very angry with them and I feel it is very unfair. Either teach them how to deal with his behaviour, and allow them to look after him, or stop them having the looking after him contact.
Your MIL may have been a child minder before but I doubt if she was looking after a 12 year old and presumably she is a bit older now and may feel this is very hard work. If you go in very angrily you may find they both feel very unhappy about the situation.
I do not agree with the way they are handling the situation but to be honest compared to being hit their behaviour does not seem so terrible, especially as your son has used the same language on one (or both) sister/s.
Personally, I'd be hugely upset if me or my husband were hit by a 12 year old boy. And I'd most likely not want to have sole charge of him again after that.
My dd is most likely on the spectrum and we handle her behaviour in a certain way. She is not aggressive to others (aside from me very occasionally). My inlaws rarely look after the kids, maybe 5 days a year. And they manage fine but their expectations are quite low I think!
I think the banter needs to stop, on all sides. Because if your son does hit another person due to getting upset, it could lead to serious consequences, and you don't seem to be fully acknowledging that. I've had to work through dd's anger and I know it is hard so I am totally understanding how you feel this could have been avoided but maybe take this as a warning that you need to step up addressing how your son handles difficult situation.
I think the knocked out comment was what might happen from another person. I've had to tell ds (7) that if he keeps making fists at people he may get hit. It doesn't mean I will hit him!
I also notice your son doesn't want to go to their house or be looked after by them, could his anger have in any way been calculated to put a stop to the visits? Could you talk to him about the visits and manage them better, maybe he could stay in his room or whatever and the Grandparents be encouraged not to take the kids out too much, so your son has his own space?
I agree with others you need a support network and you need if possible to help your son with coping strategies for times when he does feel overwhelmed.
Anyway, all the very best, it sounds tough but I feel sure you will manage it well. 