Ok, so this happened about 2 months ago and I am still really upset about it. Am I overreacting?

My Mother-in-law (65F) and Sister-in-law (45F) are Mean Girls who think they are better then everyone. My MIL belittles and criticizes me, well, not just me, other family members and even total strangers. She acts very 2 faced at times, and often undermines me to my kids.

My Hubby/Kids Dad passed away when my kids were 4 and 5, they are now 13(F)/14(M). Ever since his passing, I have wanted to make sure to stay close to my In-Laws because with my kids missing one parent, I felt they needed all the love they can get from my little village, and I thought it would make them feel more connected to their Dad. Over these past 9 years we have had our ups and downs, and some big disagreements. Usually the Mean Girl BS is just focused on me, and they are usually pretty good to my kids, but sometimes it overflows onto them, it's almost like they are just so used to talking smack to everyone and they forgot who they were talking to and spew that shit at my kids. Like one time my MIL said something about my son's legs being too skinny/white, he has quit wearing shorts ever since, not just at her house, but everywhere. Another time my MIL was talking to me (but in front of my daughter) while looking at her, “your gonna have to start getting her some of those facial razors for dermaplaning.” In other words she's starting to get some facial hair. Not that it's any of my MIL business, but like 2 years before this very rude comment, I discreetly talked to my daughter about this, we talked about her options, ect but my daughter's hair doesn't bother her, she's just a kid that wants to be left alone.

The incident that has made me want to finally cut ties: My daughter has a developmental delay and Sensory Processing Disorder. She has started basketball with Special Olympics. I'm so very proud of her, she's come a long way and this year she was put on the team. Me and the Family were at my daughter's regional game. During the game, it's a lot different than practice, bigger gym, way more people, my daughter is of course a little overwhelmed and distracted, she was not playing as well as she normally does during practice. So we're sitting there in the stands, my SIL made a comment (that I didn't hear) my MIL laughed, then turns towards me and says “did you hear SIL? She just said your daughter would be better as the mascot” (I heard, hahaha your daughter sucks, she's not helping out her team) .... I went numb, WTF? Who talks shit about a kid, but especially a kid with Special Needs, are you the devil!? I was so pissed off, but also really embarrassed because I'm sitting in the gym with all my other team parents (whos kids all have Special Needs also) and Im the one that invited these two bitches! I said “that is a really fucked up thing to say!” And my MIL says “OMG, it was a joke! Get a life, you need to get over it!”....thank God my daughter didn't hear what her Aunt and Grandmother said about her! I think it would crush her confidence and break her heart. My son did hear, after the game I asked him if he was upset at what their Aunt and Grandma said about his sister? He's like “that's just Grandma, you know how she is”...it made me so sad that he's just used to this kind of behavior. I not only don't want my kids to be subjected to this type of abuse but I also don't want them thinking it's acceptable to talk to, or about other people like this. I haven't spoken to them since.

Am I the asshole for letting this be the thing that makes me finally cut ties with my deceased Husband’s family? Am I being too sensitive? Am I overreacting? Should I continue to let my kids see these people? The kids are asking to go over the In-Laws house, should I let them go into an environment that I think is toxic?