Until he sets things straight she would not be welcome in my home. You have every right to say NO. If he wants her to visit for 10 hour than tell him to go visit her. If he doesn't go for that, pack up the kids and charge a room to his card. Make the argument that she is not good for you, nor is she good for your children when all she does is undermine you and your authority.
I want you to understand I totally get where your coming from, and I take ALOT of crap from my MIL BUT I always have my husbands support. I take the crap because I am willing to and because if she goes over the boundaries again I know my hubby will once again put her back in her place. I can put up with the small crap because I know I have his support. You don't. Don't take this the wrong way but hubby sounds a bit wimpy. If he is not behind you, you guys seriously might need to rethink what your fighting for because something is broken.