Hugs Patty. And good for you for putting YOUR children and your own well-being first. I grew up in a home with mental illness, alcoholism and codependency. (2 homes, actually, my parents were divorced). Sounds like she knows exactly what button to push (the kids) that will make you feel the worst, but what you are doing to separate from her crazy behavior is actually the best example you can set for your children.
I know it can be hard with work and family responsibilities- kids plus caretaking an elderly mother, but have you done anything for yourself- Alanon, individual therapy? Your awareness and your questioning your own willingness to accept unacceptable behavior sound like good jumping-off points to begin a healing journey of your own. You could at least check out a book from the library- Codependent No More, Love is a Choice. I've seen others recommended here, but those two I've read myself. They're pretty good.
You and your kids deserve kindness and love and peace. Sending lots of positive energy your way! Stay strong.