This is so painful to watch HFF. Things were going so well for you and then another bomb. I don't understand your wife's belief that socially unacceptable behavior should be equally accepted with socially acceptable behavior. It is not that she is an in-law that you think your sister would not be happy to see her with a date, but because she is the instigator of your separation and the disintegration of your marriage. But it is still what you think. You could be wrong. Other people will greet her as they choose to. I wouldn't speculate on what others will do or say. Life is not scripted by either you or her.
Yes, she seems to cling to unrealistic fantasies. Why on earth would you be inseparable in your 80's when you are so easily separable now. Chances aren't good. Maybe she thinks you believe fantasies, and if she keeps feeding them to you, you won't even notice reality. She reminds of GH31's wife. You hold still and wait for me, I'll be back when I'm 79.