I just wanted to come back and say thank you for the supportive comments and advice, also to provide a brief update.
Things have progressed fairly quickly in the last few days. The hospital staff have had some honest conversations with FIL about the level of care that he is able to provide at home and as a family the decision has been made that full time nursing care is the best option for MIL (we are still a bit clueless as to how this is funded etc). A social worker is going to be assigned and hopefully we will hear from them on mon. In the meantime, though not sure when exactly she will go into an assessment facility where they can determine exactly what her needs are.
The ward manager has apologised to the family as apparently they should not have been asked to be with MIL at all times - this is not hospital policy and it appears that individual members of staff had taken it upon themselves to insist they stayed,
Just to add - there has been someone from the family with her at all times day & night for the last 7 days. We do not know how much longer she will be in hospital but we have agreed with them that a member of the family will not be with her overnight.
To address the points in some of the less than sympathetic posts, I can only imagine you have zero experience if caring for someone in the advanced stages of dementia. It is NOTHING like caring for a sick child, You choose to have a child and you base your life & working hours etc around their needs.
My husband has a few days compassionate leave that is it. I am a teacher and cannot take holiday so when I am at work he needs to do the school runs etc. SIL doesn't live locally/doesn't drive and BIL works shifts
As for the poster who said that DH is lucky to spend be spending quality time with the person that he adores - you have made some huge assumptions about the nature and history of the relationship here. Please don't it is hurtful, Not everyone adores their parents and in any case MIL has no idea who he even is. It is certainly not 'quality time'
Once again thanks for the advice and sending lots of love to the posters who have been/are going through the hell of dementia. Wouldn't wish it on anyone