marina7 - I am sorry about the latest conversation between W and kids. It is sad to see the kids get upset. As more and more time goes by W gets more and more out of touch with their lives. The kids know this, they can see it, and they will call her on it.
I think you are doing exactly what you should - Love your children, hug them lots, keep encouraging them, let them know this is not their fault, and try to help them see that W is probably doing the best she can.
You are giving them a good understanding on which to build acceptance and coping skills for what is going on in their lives.
Keep being a good role model, they are watching, and they will make it.
Feelings are fleeting. Be better, not bitter. Love the person, forgive the sin.