That's true.... it might be a case of 'don't shoot the messenger'! And you definitely don't want to come out of this the bad person. Do you think FIL is just turning a blind eye to it all? If that's the case then I'd leave them to it.... he's a fool and she's taking full advantage.
It is a bit gross isn't it. It's hard enough having to deal with the thought that dp was breastfed by MIL, never mind the thought of her having a quickie on the office desk!!!!
How old is she, if you don't mind me asking?