I would get rid of the baggie and when the opportunity should arise, I would say..."h, I went into your office to get something and it reeked of a foul odor. When I found where the odor was coming from, I discovered the baggie. I flushed the stuff down the drain and aired the office out.
Well, I'm not surprised that he's dabbling into something. They all tend to experiment (again) from days gone by.
As for the BIL, tread gently, but he needs to understand that he's an employee and will need to keep his opinions to himself about whether or not your h needs to come into the office. After all, it's a business that both you and your h own...am I correct on this?
Get rid of the baggie! Do not share what you found w/the BIL.
Sit quietly, the answers will reveal themselves when you least expect them to. The past is gone, the present is a gift and you need to focus on today, allow the future to reveal itself when it is ready.