I don't know why but I am getting the sense that you are dealing with someone who might be passive aggressive? Whenever family members are throwing their B.S. issues in my direction I've found that the most effective response is being reasonable and assertive.

You are entitled to have your own reasonable boundaries respected, especially in your home. You can be polite and assertive and in my experience if it doesn't make the BS stop, it at least makes me feel better.

Letting your in-law bully you away from your own children seems like it is probably going to hurt both you and them.