They sound like lovely people. (LOL!)

I hope your DH has lots of therapy planned for himself, because it's not easy to unlearn all this terrible dysfunctional behavior. 

FIL sounds abusive and MIL sounds like my own MIL, who uses her "love" for everyone as her justification for not respecting everyone's boundaries. 

In my case, DH realized deep-down that his family was not who they wanted him to be, but it took some really egregious incidents and lots of prodding from me to get him to pull back from all of them. He periodically tries to tell me that I made him turn away from his family, but then I remind him that a) he told me things about his family that indicated he could see their true colors before I even formed an opinion; b) he rarely hears from his family unless they want something from him and that isn't any different than the way things were before he met me.

He's now also seen how my family treats one another, which I think has been eye-opening for him. For example, when DH was in the hospital, my mother offered to fly out the next day if either of us needed help. He didn't even hear a peep from BIL or SIL and MIL was just upset that she was going to have to "waste food" because we were supposed to go over to her house for brunch, but cancelled because DH had been hospitalized. 

It's still a hard pill for him to swallow that his family aren't the perfect family that they would like everyone to think they are, but I think it helps both of us to keep them at arms length. 

My DH's attitude about his own family (except his parents, who are deceased) is, "I love them from afar". We have very little to do with them. He talks to a few of them on the phone but that is about it.

Sounds like it is time to call it a day on your relationship with them all.

Take weddings and funerals on a case-by-case basis and other than those I would avoid all family events and activities. Your husband can take your joint kids to events if he wants but I would work with him to develop some guide lines as to what you think is and is not acceptable for them to be around and get his commitment that he will remove them if the situation is not healthy for them. 

Apart from that I would just try your hardest to ignore them and their lives. Your husband can be their point of contact. 

Preach on! I'm realizing that the in law junk never will fade. It will rear it's ugly head every dang holiday, seasonal change, vacation, sporting event with a dip bowl, and my own kids' milestone moments. It's so no ok. Sorry you got a dud bunch for extended family for your kids. I feel you. 

Those people are your DH's family of origin, so he's been conditioned to think their ways are normal. He has a place and a role in their dynamic, and probably unconsciously slips right into it when he's around them.

My DH worked in law enforcement for many years. He handled countless disputes involving dysfunctional families, couples, parents with delinquent kids, etc. He can spot a liar or a mentally unstable person with unerring accuracy, tell if someone is high,  counsel like a priest and calm an angry drunk. But around his own family, he becomes weak and powerless. He would fall right in with the dysfunction that has existed for many decades, and just go along with whatever crap or drama was occurring. 

These men know that something is wrong in their FOO, but psychologically it can be hard to admit and harder still to identify specifics. Look at all the women who come to ST saying they have a skid or BM problem, when it's really a H problem. Accepting hard truths takes time, support, and a willingness to face reality. Some people never do.

Your challenge is to distance and protect yourself and your bios without starting a war. Your in-laws are not going to change, but they will go on the offensive if they perceive you as a threat to the way they've been doing business for decades. Your DH is still tied by fear, obligation, and guilt (FOG) to his FOO, and may start to resent you for drawing healthy (but oh so inconvenient!) boundaries. And there's SD and BM, also flinging poo if you disrupt things. 

IMO, the best way to handle interpersonal poo in a marriage is to gradually fade back from it. Slowly, incrementally disappearing while still following form means you can't be accused of anything overt, and your marriage won't be taxed by you repeatedly pointing out bs to your DH and him feeling pressured to deal with it. Rock that passive resistance, and just don't engage. Don't answer calls from the in-laws, don't respond immediately to texts. You're a busy wife and mother, right? Stay that way, and fill life up with obligations and activities that make you unavailable. Throw the in-laws a bone once in a while by inviting them to your house for a meal, but start establishing that your home is where visits happen and cut out the trips to Mecca. Use fewer words, and let your actions speak.

Make your home and marriage a place of comfort and sanctuary. That's what I did. And I stopped being a buffer, so my DH had to handle his people. He got fed up with the drama, manipulation, and games, and didn't like being pressured. Creating opportunities for your DH to feel and experience inconvenience and negativity from his FOO will help open his eyes. 

There is a sense of loss when you were hoping to join a loving extended family and finally realize it will never be.  This is doubly true if your own FOO is absent for any reason.  It's okay to grieve that loss.

Fill you life with awesome friends and spend your time with positive people as much as possible.