I'd recommend doing what is best for your family - not theirs.
We had an in-home baby sitter until our 2nd child was 21 months. She took our choice to move to an organized day care really hard. It was better for us. She took it personally and has chosen not to stay in touch because she couldn't get past us doing what was in our best interest. We paid her for 4 weeks she never worked to help her find something - she cashed the checks and never looked back.
Having family in the NOVA area (and having grown up there), I know it's not as easy to find accommodations for kids as it is here in Indiana. So, I'd let her know soon and be prepared with a timeline of how you'd like to transition. Just be prepared for her to perhaps not take it well.
Ultimately, it sounds like the mother is very particular and will have a hard time replacing you - but part of your reason to leave may be because she is so demanding, and she'll quickly learn to be a little more flexible.
I'd make it a point to let her know how much you'd like to continue to be part of their lives - if she chooses not to, I'm so sorry - her loss.
Good luck in your decision - follow your heart!