You're asking for relationship-management advice more than financial advice, but I'll give you some things to think about regarding the situation.
If you were a close friend I'd have several questions to ask before saying more, among them:
1. Why have you been subsidizing MIL this way for 18 years? How did that come about?
2. Why is the "brood of vipers," i.e., her other immediate family, not subsidizing her or sharing the cost - at least some of it?
3. Have you had conversations with her before about the condition of the home?
4. How was your son run out of a property that *you* own?
5. Why have you been fully paying your MIL's living expenses for 18 years, *especially* if you, your wife, and your kids aren't already 100% taken care of (e.g., are you financially independent)? I assume you're taking care of them, but there would be a lot of things I might do and alternatives I might explore well before paying all of a relative's housing expenses.
Your situation may be more complicated; you didn't give us those details, and it's impossible to really answer your question without answers to those questions and probably others. You may have answers to the questions above that I wouldn't expect.
This book may be well worth a read (you can pick it up at a local library) to evaluate how you're doing with this relationship with your mother-in-law.
Sometimes, humans need emotionally difficult situations to teach us things. So difficult isn't always bad. I do not *enjoy* difficult converstions about finances with close family who are struggling, and I may not like difficult conversations about behavior of family members that needs to be addressed. But I do it when needed, because I would much rather take initiative now rather than be passive and watch others get hurt and then realize it was my responsibility to do something about it.
(Implicit in that is a question: what is your role in this situation? What is your role in the support of your MIL, and why are you supporting her?)
Short truth: There's probably no easy way to unwind this without emotional pain. Period. You've allowed MIL to treat a whole house like a gift, basically, for years now. She may view it as you taking from her when you now insist on conditions or attempt to remove that gift from her.
It's easy to create dependency by floating someone cash or expenses over a long period of time. Situations like that are harder to unwind than they were to create.
There's another book on things like this - when charity hurts those it intends to help called, appropriately enough,
When Helping Hurts. It addresses things from a religious background, and includes spiritual needs (along with physical, emotional, and so on), but I recommend it regardless of your religion. In short: you can often hurt people (when you think you're helping them) by simply sending cash/resources rather than addressing the underlying needs.
And a corollary: it's actually harder to help people than it seems, and more relationship-driven than it seems, since you have to know someone in order to truly help them in many ways.
Tip: I wouldn't promise MIL enticements to get her out of the situation only then to bail on her or eliminate the support. That might be easier, but it's relationship-ruining. Be honest with her. Realize that it'll probably be difficult family-wise and emotionally, but that's not necessarily a bad thing. It sounds like there may be more than one hard conversation that needs to take place.
And own what you can: admit if you've been too slow to address problems/create boundaries/take action, for instance, and apologize for it. This situation didn't develop overnight, from what you have said, so you can own the fact that you didn't address the problems sooner and more proactively.
One more tip: if you're funding the adventure, you get to set some boundaries, such as how the house is to be treated. You have to communicate those and make it clear, but this is your house, after all, so it should go without saying that *you* get to set some of the ground rules, such as how to avoid damaging the house.
That should be obvious, and if it's not, then I doubly recommend the book above.
But, again, without knowing a lot more, it's hard to say anything specific as to your situation.
