PM, you are doing great. It is very liberating indeed when we the LBS's get our emotional legs and stop reacting to the Infidels....LOL, really. I too am just starting to realize that the ball is in my court and I don't react to her anymore. She doesn't know what to do. I think you are doing great for everything I have read. Making your kids No 1 in your life is key for those of us LBS's who are the full time parent. Make your children's life as normal as possible without making excuses for your H. It is a tough line to walk. You want to shield your kids but not do anything that would make you an accomplice to your H's actions.
Glad you are doing so well and hope the MIL splits soon. She is probably very embarrassed and finds it hard to be in your presence because of the shame she feels for her son's actions.