I would not be so quick to diagnose your husband's behavior as a disease. He is probably as overwhelmed by his mother's behavior as you are and cannot figure out what to do so each episode is a trauma for both of you. There is something you can do which is to get you and your husband into family therapy so that together you might be able to talk this thing through and develop a strategy to protect yourselves and your children. You don't want your mother-in-law to drive a wedge between you and your husband and this is the best way to stop it.
Are you sure you are dealing with bipolar disorder? Your post reminds me of our DIL - she suffers from Borderline Personality Disorder.
Besides a little therapy, I think you and your family should avoid this woman like the plague. Her negativity will do nothing but bring you down. Your husband and his siblings should be standing up for you and the other spouses; by not doing so, they are enabling her behavior. Almost seems like they're scared of her. You can always block her emails and phone calls too.
If your husband allows her to visit anymore without setting groundrules, maybe you should take the kids and stay at a friend's house for awhile. Your children don't need to be exposed to someone that badmouths their mother, it will only teach them that it's ok to be disrespectful towards others. And your husband needs to stand up and tell his mother to knock off the bs. Just my 2 cents. I also agree with jdtm, she sounds more borderline then bipolar. At the very least, someone full of hate and loathing.
I learned a long time ago that some people just aren't worth being around.