There may not be a middle ground. You may have to decide to get involved at any cost or let things go on as they are. We are dealing with this same type of situation with my sister and her kids and it is never ending and heart breaking to deal it.
Take a minute and access what you know...
Are the kids in danger or just not in your ideal situation?
Are the kids miserable or just embarrassed?
Are the kids being denied friends or play dates completely or just ones in their home?
Are the kids dirty and unhealthy or just messy?
Are they being feed and well taken care of otherwise?
Would their life be better off in someone else's home while their parents try to get their act together?
Finally, are you willing to go all the way to the end with this if you think it is worth pursuing?
It WILL make things worse between you and your extended family...maybe temporarily or maybe permenently. It may mean the kids will have to go to another family member until things are settled...are you willing to be that person?
You might be giving the parents the shove to clean up their act, but you might be giving them the shove to hit the road too..
Be careful when talking to the kids, by trying to get the kids to open up to you, you are asking them to disobey their parents and putting them in a tight spot. Plus you are potentially putting yourself in a "bad guy" position instead of the "savior" you want to be and that will make things harder on everyone if you end up sheltering the kids. Or if there is an investigation and everything is deemed "ok".
I would suggest the you go talk to CPS without naming names. Tell them your concerns and talk to them about your options. Then you can make an informed discision once you know where your actions or inaction might lead.
Good luck you have a long road ahead of you.