Take
Control
Of
Your
Life.
I'm so sorry this is happening. It seems out of your control - but it's not.
The past is simply that. Past. You can't change it. There's no point dwelling on it. The blame game is pointless.
B U T you can learn from it. Take ownership - it's YOUR life.
Step out of the toxic set up. The only reason MIL behaves this way is because you allow her to.
You and DH need to be united, plan together and back each other up. Decide that today is the first day of the new 'you (plural)'.
Work out:
What is the problem (I don't think it's MIL wanting to move in... I think it's the unhealthy relationship)
What are the existing issues
What are the potential issues
WHAT DO YOU WANT
how do you get what you want
Once you've thought about and agreed on the above, you BOTH speak with MIL. She needs to see you're both in this together try and have the discussion somewhere neutral and where you don't have to worry about emotions surfacing
Be positive. Try not to be confrontational. Stick to facts. Only bring up the past if it's relevant. BE HONEST. It's OK to be honest and you can do so without it being an argument. Be ready to compromise but do not back down from what you want and need.
If the full 24 hr weekly Wednesday visit is too much - say so. She could come an hour before school pick up, spend time with you both for an hour. Do school pick up, have dinner and then leave just before wind down time. If she uses the dark as an excuse - suggest she leaves when it's light then... Be ready to suggest alternatives, responses etc. She'll do her best to justify her wants - you be ready with solutions that suit both MIL and your family.
Next - moving in. I wouldn't spend too much time on this. I'd tell her it's unrealistic and unfeasible for multiple reasons. Space. Your family dynamic. And then bite the bullet and be honest. We've lived together before and it did not work out. For the sake of the relationship, you cannot and will not live together. And be straight. Tell her it's not what you want
End on a positive if possible. Tell her you really want to change the negative relationship. You want to make it positive, friendly and healthy. And you've realised that this means you and DH need to start behaving like adults and making decisions and learning how to communicate properly with her. That way you 'take the blame' and she won't feel 'accosted'. And then gently suggest her part but not in an accusatory way.
Involve her. Listen to her views. Reach an understanding together. Make it clear that this is a tipping point. Explain that things have changed and you'd like her to be part of that change but if she can't - it's her choice.
It seems a massive task. Believe me - once you make the decision to take control and responsibility, things change very quickly and you wonder why you thought it was so scary.
It's easy to stay fixed in who did what to you,who made you feel 'x' and so on. Accept your part too. Only you can make you feel. It's hard to take control but you can do it.
PS. I worked out that the main problem for me (similar scenario) was that I'd stayed in a child/adult dynamic as I was 16 when DH and I met. Our parents continued to treat us like children and we let them and actively contributed by staying in the child role. Maybe something similar is going on with you.
Good luck. Be strong. YANBU. Don't let this continue. It's not good for anyone - especially your children..