I don't have any advise for you, but I really have to give you my applause for being such a generous, understanding man towards your brother and law. Protecting his dignity is the best you can do for him.

I don't know how severe of mental illness your brother in law has, but has there been discussions with his parents or a therapist about keeping his job and treating his parents respectfully? IMHO, I believe that people with MI still have the responsibility to do what they are capable of. If he's capable of working a job, even if impaired, then he needs to know that's his responsibility.

Hope someone here has a better answer.