I am so sorry to hear about your friend's passing. I know how much you thought of him.
I am also sorry you are torn between a rock an a hard place. I so want to smack your H upside the head because his selfishness is causing all of this. I give a standing ovation to your FIL for saying what was on his mind to him.
As for the ow, she is going to look like the complete idiot being there. She will walk in carrying the title of The OW and she will be frowned upon. Idiot. She will never have the respect that you have.
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I will plan a trip for me and the kids to go to Chicago this summer and visit our friend on our own. That way the kids get to go and see her too, and let her know, in their own way, just how much they loved "Uncle XXX" too.
I think this would be a wonderful idea! It's up to you really what you think is best to do for your own sitch. I pray that you find peace with whatever decision you go with.