This is going to be a hard battle no matter what you do... unless you have proof that the $130K wasn't a "gift" to your in-laws. I'm not sure whey the BILs are there also... are they grown??
We have a house that was "given" to us to pull it out of a condemtion for an old lady... it has been a huge pain - sorry but it has. She is living in the house we own next door & can't even get her out of it. She has damaged the house, let people move in that shouldn't (who have damaged the house), had a ton of animals roaming around spraying & pooping everywhere, and has had the cops there a number of times - causing issues with the neighbors. But because of the "verbal" contract we had - it has been a very hard fight... back in Dec we had the contract put in writing & evicted all the "extra" people she has living there, but the courts left her in the our house (not the one she gave us). She has since let the people we evicted move back in & we have to go back to court to start all over. But are hoping that now that we have a written agreement it will go easier... don't get me wrong - when we started all this we were asked to help her & did choose to do so, but never emagined that she would be as mean or nasty as she is, or take advantage of the situation or us when even her kids wouldn't help her... she hasn't paid us anything that she was suppost to (taxes or insurance) or followed through even on the Ohio's Live Estate Laws - with is how she transfered the house to us. Her daughters haven't talked to her in months because of what she is doing to us... and they were the ones that helped set-up the whole deal & understand why we just can't help anymore.
We have told her she can have her house back - just give us what we have invested in it... and she has refused. She is getting a "free" ride and I almost lost my house last year over all of it... got laid off & spent everything I had to help her. But she still says "I haven't done S*** for her." Eventhough the roof she is living under FOR FREE is our house - she had no link to it at all... since we bought it from a bank before we even knew her.
Honestly... I'm not sure why your MIL is so nasty to you when you have helped her so much. If you are paying most of the bills & have proof of that - you might have hope. Contact a lawyer to see if anything can be done... but with the house in her name - they are going to have to let you know your options. Also, I'd try to get the BIL's out so that your kids have the ablity to have more room - take back over the parts of the house that you should be "sharing" and the backyard as well. Unless your MIL changes, you kids will see her for what she is & there is really nothing you can do to change that. Kids make their own chooses as to who to like & dislike... based on her actions is how they will make that desition.
Try to take care of yourself though - do whatever you can to stop yourself from falling back into the hole of depression... I know it can be hard. Even if you can take your kids for a walk a few times a week (around the block can even be good) just to get away from the situation for 30 min - should do you good.
I wish you TONS of luck & LOTS of strength to keep going & get through this... I know you will find a way!