Please accept my condolences to yourself and to your whole family. It was lovely to hear you refer to her as your wonderful mother-in-law, as a lot of people don't have the best relationships with their in-laws. I'm really sorry to hear of your loss. Is there a father-in-law? I was wondering if his feelings will need to be taken into consideration as well, or is it just you and your kids and your husband who you need to find a way to work Christmas this year without her?
I can tell you from personal experience at the first Christmas after losing a loved one is the hardest, although just two weeks before christmas, that's got to be tough. I'm sure that you already had your plans in place and presents are bought and everything and yeah. That really is hard. I know.
I'm assuming your husband is going to be taking this pretty tough. And the rest of you also. You don't want to sweep the hole issue under the rug, do everything else as usual, because that isn't fair to the grieving process.
My suggestion would be to create a new small special ritual that works for your family at this time. Expect that it won't go perfectly because it is the very first time and you're creating it yourself, also because the grief is so raw, emotions will be very fresh.
For instance, if you feel it's appropriate, your kids could write a short letter to your grandma or just a note, doesn't have to be long, or even a picture if they want to draw one, and they can place it in a stocking up along to your mother-in-law. I don't mean a stalking that she would wear on her foot I mean a Christmas stocking.... If you had one for her. And you could put these notes which you don't have to read out loud, into the stocking sort of as your way of having some closure and speaking with her but you don't have to say the words out loud because sometimes that's really hard. Granted, probably everybody will be crying tears as they write the note, but it really helps sometimes to put things down on paper. And putting them in a stocking with her name on it at Christmas time is kind of like a long distance phone call to her.
It's a ritual that I got into after my grandparents passed away and I've been doing it for years.
You could buy or you could make a special ornament or something else like an ornament, some kind of decoration, maybe with your favorite photo of her or better yet of all of you with her. These days with computer editing the way it is, you don't even need to have a fantastic group photo with all of you in it, you can make a good group photo as long as you have good individual photos that can be put together. This is very quickly and easily done if you don't have the skills, somebody else can do it for you online for just a couple of £. It could be a framed photo, it could be an ornament, it could be anything that works for your decorative style and, in a small way it'll feel like she's still there with you in the room when you look over and you see her there.
Or if there was a cause that was near and dear to her heart, if she absolutely loved birds for instance, perhaps your family could make bird seed feeders out of peanut butter and nuts and seeds and such, put a nice ripping on them, and go out to your yard or to a park and hang them up for the birds. Something that you think she would have liked and something that makes you feel a little bit closer to her. Like I said none of these are perfect examples, I don't know your situation, but I'm just giving you an idea of the kind of things that I've worked through with my way of dealing with grief of a loved one, little rituals that I've created that mean something to me but make me feel closer to them. I don't know if this helps but I hope that it does.