What a lovely man you are Desperate. Loyal to the woman you love, but not blind to her faults. Sensitive to your d.i.l. which enables you too see how she is changing and the affect your wife's behaviour is having on her.
I said you are loyal, an admirable quality but that doesn't mean you have to enable your wife's behaviour. You've been able to share a very difficult, sensitive and upsetting situation here and now you need to share with your wife, what you've shared with us.
As has already been suggested, one way would be to show her this thread including your OP but personally, I think that would be too much.
IMO you need to start with the present and then work backward. Start with your wife wanting to contact social services and tell her that would be wrong and she will not have your support, that if she does this, it will be your d.i.l. you'll be supporting.
This is the most pressing issue which needs to be dealt with quickly and decisively. Once you've done this, you can then talk to her about her general behaviour, how it impacts on your d.i.l., your son, you and even though she may not be able to see it on her too.
Be honest about your own role. Take responsibility for the fact that she "pretty much raised" your children; your words. That you've felt for a long time that she's been over involved in their lives but have failed to say so and so you are also responsible for how things are.
I'm sorry but you are, and walking away from your 50 year marriage wont solve anything in fact it will only make matters worse as her only focus will be on your adult children, on interfering in their lives and making your poor d.i.l. even more unhappy and withdrawn than she already is.
Your d.i.l. needs your help, she needs your son's help too and I hope that he'll be able to put his wife's and child's welfare before his mother's. You need to encourage him to do so.
Your wife needs your help too, to see that she's wrong and to see how much she could potentially lose if things don't change.
It wont be easy for her or for you but you want to do something or you wouldn't have come here, and that together with being able to see what's wrong is the first step. Now you must take the next one.