If you have a history of problem drinking and your spidey-sense is tingling around MIL - I would pay attention to it. It sounds like she has made it clear to everyone that she is going to choose drinking over people (by saying she's going to leave her husband if he brings it up, or that she'll stop providing care for her grandkids).
So that's what you know - when (not if) it comes down to a choice between good relationships with family members and alcohol, she's going to pick alcohol. At least you have some advance notice of what's going to happen.
With this knowledge, how can you facilitate your kids having a decent relationships with their grandmother while also remaining safe? Maybe by switching to non-family child care and seeing MIL on weekends for short periods of time?