Hi M.,
First off, I will agree with you, that it is not right to allow anyone to keep secrets from mom and dad....ever!
But, let's not get ahead of ourselves. It's obvious your hubby and his sister are having their problems. Your MIL knows about how your hubby would feel if SHE talked about his sister, so she doesn't around you guys.
It's probably innocent, and she said "let's not tell" to the kids so they wouldn't upset their daddy because grandma was having a relationship with his sister. Of course she's going to have a relationship with her, it's her daughter!
Now, unless your SIL has done something to your children to bruise the relationship, then I see no harm in your children knowing your SIL and seeing her on occassion. So, just because you and your hubby have issue's with her, don't let their kids NOT know their family because of it. They'll make their own choices about their familiy when they are adults.
I do think you or your husband need to talk to your in-laws. But I think you should hold back your anger. Tell them your son was told to keep a secret from you, and you don't want anyone to teach him that in today's world. Ask her, if he learns to keep secrets over this little issue, then how is he supposed to tell me a much bigger secret (say from a predator)....no secrets from mommy and daddy.
I bet your MIL had no idea something ike this would ever happen. I bet this is whole thing is blown out of control. And when you call your in-laws.....I bet your mother-in-law is going to THINK you're upset because of the BD Party with their Auntie. She probably has no idea it's about "keeping secrets"......
Go easy on her.......as least this way, she might still babysit for you :O) Just kidding....
~N. :O)