Hi K.,
I definitely would not allow this woman by my children. Just reading your post gives me the creeps. We moms have a natural instinct--girl, trust your instincts on this one. I would contact the other moms whose children she visits and get a group support going here for yourself. Let them know what you know about the situation. You may be surprised to find that the other moms may feel just like you do. And, no, you are not crazy. There are alot of weird people out there. Honestly, no normal, respectable person would not ever dream of befriending a minor...period. A normal person, if they are lonely, devotes their energies elsewhere to make adult friends--a job, church, getting a hobby, joining an online club, a gym, etc. Personally, I don't know this woman, but it sure seems to me that she is putting herself in a potentially bad situation--being accused of molestation by one of these kids if one of these kids ever gets into a beef with her. I say, sit your kids down and explain stranger danger to them. Also, if she is living with a boyfriend, he may be in on the bad behavior too, keep that in mind. You can also tell your kids, from a Christian point of view, that you do not approve of her lifestyle (live-in) boyfriend. Bottom line: stick to your guns.
Good Luck,
M.