So 1st of all I'm so sorry that you have a crazy MIL who can't respect your boundaries.
From the perspective of a practicing Mormon, perhaps I can share some thoughts on the situation.
I completely respect that you do not believe in Mormonism. I only share the following to explain why your MIL seems to be overly crazy, even from a Mormon perspective. She shouldn't even be teaching your kids about Mormonism because it seems like she is missing it. One of the things I love about Mormonism is that there is a way within the doctrine for everyone to have the chance to go to heaven. Whether they knew about mormonism or not. Even if they were Mormon and left, there is room in the doctrine for those people to live as eternal families too. Everyone will be judged perfectly by the savior. Another thing that is super central to mormon theology is agency. We do not believe in pre-determined lives. The ability to choose our path in life is really important. Which is why it bothers me that your MIL is so crazy about teaching your kids Mormonism. Within Mormon theology, they will be OK! And she's willfully damaging her relationship with you and her husband. Even though if she truly understood Mormon doctrine there would be no reason to act in such a way.
Many religious people including Mormons can become overly zealous, hone in on certain aspects and forget the balancing other aspect. Seems like she is forgetting the agency and ordinances by proxy part of the religion.
Unfortunately within mormonism there can be rheotoric among church leaders which can make mothers feel bad if their kids leave the church. Especially among women. There is a lot of rheoteric around moms nurturing and teaching children what's right. Especially if motherhood was her sole occupation, within her mormon community there can be a lot tied into her identity as a successful person based on the religious "success" of her posterity. I hope that makes sense. I don't think that makes her actions right, but perhaps it you can understand a bit of her crazy. And again that's an aspect that some Mormons can obsess over in an unhealthy way. Cuz remember that whole agency thing? Balance lady! And hugely, if your husband is a good, kind person because of how he was raised, then she did well mothering him!
Also, many, many Mormons do not take all the stories in the bible literally. Just throwing that out there. Your MIL seems really overly crazy. There is totally room for understanding that through translations over 2000+ years that things can get exaggerated or enter the realm of fiction. Nonetheless the stories can be instructive and useful. If you don't feel that way, that is totally cool.
Here's a suggestion a bit different from the others. Perhaps learn a bit more Mormonism on your own and share with your MIL some of the things you like about it. Perhaps by showing you are understanding of her beliefs she won't feel the need to sneak teach your kids. I recommend this lecture by a practicing Mormon academic. It's about an hour and it isn't preachy. It was a presentation given at an institute to foster religious understanding among other faiths. I would NOT recommend meeting mormon missionaries. http://www.icjs.org/mormonism.php
Maybe also having a conversation about the things you appreciate that she taught her son. Then sharing that her constantly trying to teach your kids is really straining your relationship. You'd like to have them involved in your kids lives but, if it continues you won't be able to have her around your kids.
Then again, she may be so beyond reason this could never work. I'm so sorry you've been dealing with this for many years, and I'm sorry you husband is having a hard time standing up to them. Good luck!