EDITED: I just saw your SWH. Honey, why are you taking on some of the blame here? Because you didn't anticipate how horribly those children would behave? Because they didn't obey you? Maybe the play date should have been cut short, but you've been trying to be a tolerant and good friend. Just... a little too lenient and tolerant. The situation isn't good for anyone. Don't you shoulder the blame for this.
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It's reached the point where you can't lie to her. They were so incredibly disrespectful and destructive... and YOU were the one disciplining them, not her. It sounds like she's given up. She thinks she "can't" parent and therefore she doesn't? Is that it?
I wish I didn't understand your position but unfortunately I do. I've had to inform a good friend that their child was no longer welcome in my home until their behavior was under better control. She knew I was right so although it stung both of us, it was a wake up call for her. It was one for me too. My children cried when her kid was over because he was mean, rude, destructive, disrespectful, had no boundaries, and was an all around tornado. My husband had the same edict: he's not allowed back in our home or to any of our events until the behavior is changed for the better. In our case, that meant after my friend left her husband and had less influence over their son.
I have a couple of points in there. What you're currently doing is no longer working. She's not doing anything at all, and that's not working. You're going to end up resenting her for that, and you'll end up not enjoying her company so much. It'll be worse for your friendship if you DON'T say something.
Your children see this behavior, and they see that those children are not getting real consequences. Your children are aware that it's not appropriate and have commented on it, and that's a sign that they're not enjoying the time spent with these children any longer. It's not fair to make them spend time with children they can't like and respect because these other children are destroying their home and property, upsetting their parents and getting away with it.
Your husband. He lost some very valuable things too and his wants and needs were very clearly expressed. It sounds like he's tolerated a lot, and he's right that enough is enough.
Your family's needs to not have these children in your home are more important right now than being polite to your friend and her little terrors. She needs some bluntness regarding the behaviors and the discipline. She can choose how she reacts, and then you choose your response to her reaction. Stand firm that you will support her, but that it can't be in your home. Suggest that you get together without the children for a while. Don't talk about the children after the confrontation. But I do think there has to be a confrontation.
"Sweetie, it's time we had a serious talk. You know I love you and your children. The problem is that lately, I've felt stressed out over discipline issues when the children are playing. The last time you visited, there were many irreplaceable valuables ruined and it upset Jack. My children's favorite toys were broken and had to be thrown away. I had to throw out several decorations that were around the house too. It seems like these incidents occur more frequently and I'm not sure how to improve the situation or help you, but Jack has requested that we move play dates to a neutral location or to your home for a while. I have to admit that I like that suggestion. I'm sorry if that hurts your feelings. I felt that things have reached a point where it makes me a better friend to say something than to keep it in and not be truthful."
Then give her a chance to talk. Stand firm about meeting elsewhere and then suggest meeting up without any of the children in tow.