If you find your inlaws too difficult to deal with, its actually the same deal for your children as well. Would reconsider not keeping the children away from them going forward. If the other set of grandparents are nice and importantly emotionally healthy then I would concentrate efforts on them. Why would you want your children around such nasty relatives anyway, relatives who by their actions have driven their mother into having no contact. Your H may want to keep up a relationship of sorts with his parents (perhaps out of his own fear, obligation and guilt) but that does not mean that either you or your children have to do the same.
Your explanation to a younger child needs to be calm, pragmatic, measured and short. Long explanations make you look defensive which will tend to peak the interest of the child and prompt him to push the issue. You can gauge what is appropriate information depending on the age of the child.
Yes, children usually love their grandparents. Children are often quite indiscriminate in their love which is why they need parents to guide them. Not every person is safe to have around and this is a good time to teach that important life lesson. The more matter-of-fact you are, the more matter-of-fact your children will be. When we act hysterical, they will usually reflect our hysteria. If you act anxious, they will act anxious. If you appear unsure, they will push. Model the reaction and attitude you want your children to adopt. Emphasize to your children how much we enjoy being around grandma and grandpa so-and-so (the decent and loving grandparents). Cultivate your children's relationship with the decent, loving grandparents. Teach your children to be grateful for the decent, loving grandparents. Gratitude is a highly effective antidote to loss. Focus them on what they have, not what they don't have. Model that attitude of gratitude.
It will not do them any favours for they and their dad to keep seeing his parents without you present. Also if you are bad mouthed in any way by them (a likely scenario) your H is not going to be able to stand up for you and your children would also be caught in that crossfire.