You don't have to explain anything to anyone. As you said, no one walks in your shoes. I would however tell the children, so that you cannot be held hostage with that information.
My XAH did something similar with me. While we were separating, he threatened to tell people close to me that I had been an exotic dancer for 2 years (to support HIM while he drank and loafed around at home, mind you). He tried to hold that secret over my head and use it to manipulate me. So I went ahead and told a bunch of people, and when he tried to blackmail me with the "secret" again, I burst his little bubble. He was quite disappointed, as he had used the same technique to keep BabyMama #2 in line for several years...in fact, as far as I know he STILL uses her "secret" (she ran off after giving birth to her son and came back a year later) to control her...
As for coffee with the MIL, you don't have to accept, especially if you feel you'll have yet another person pressuring you to "stand by your man" (*puke*).
Keep your eye on the ball and keep posting!!