Hi S.,
There is a reason they had a character like Marie on that show ..... it's because there are so many of them in real life ! And the reason we laugh is because we can all relate. We all know someone just like her !
My own Mom, as much as I loved her, was the same way. She had a favorite child, and when that child had a daughter, that became her favorite grandchild. She had been pretty fair to all the grandchildren until that child was born, so it made it confusing for the older grandkids who now wondered what happened ? We even heard rumors that she had, on at least one occasion, introduced her to someone as her ONLY grandchild ! (She had well over 20 grandchildren at the time.) And now that Grandma is gone, and the little girl is grown, the girl is telling everyone that Grandma and Grandpa called her their 8th child (they had 7 of us). She fully believes she will be treated the same as the children when my father's estate is divided. (She is not even mentioned in the will. None of the grandkids are.) She sees herself as our sibling, not one of the many grandchildren.
Your mother-in-law DOES love your children, and is proud of them, too. She just seems to have an extra measure of all that for the granddaughter.
Unfortunately, you can't do anything to change a person like this. I don't understand how they think, but they are never going to change. All you can do is help your kids so they don't let it affect them.
Don't voice your feelings about it within earshot of the children. If they don't hear anything bad said, it will not even occur to them for a surprisingly long time that there is anything at all wrong with the way things are.
In fact, when they begin to realize that cousin went on a fun trip with Grandma, and they didn't, they will one day begin to ask Grandma to take them too. Let HER answer them. She may surprise you and give them what they ask for. If not, then let HER sit on the hot seat and answer their questions. SHE created the situation, after all, by bragging to them.
Kids are much more forgiving and tolerant than we, as parents are. They may eventually realize that things are a little unbalanced, but a well adjusted kid will just be happy for the cousin with the lion's share of attention, and still be thrilled with any attention they get from Grandma at all. They will pick up their cue on how to feel about it from YOU. If you want them to feel slighted, continue to feel that way yourself, and make sure they know you feel that way. If you want them to be happy and not be bothered by it, then take a lesson from the kids. See how happy they are to just have whatever Grandma is willing to give them in time and attention. Learn to be as accepting and gracious as they are, and understand that this is just the way Grandma is, and we are going to run into all sorts of different people and situations in our lives. Many times life is not fair. We can't force it to be fair, and this is just good practice for the kids to learn that sometimes you get the short end of the stick in life, and sometimes you don't.
They love Grandma, and they know she loves them. That's all they care about.
My own kids are all in their 20's now, (one is nearly 30) and grandma has been gone just a little over 2 years. They are well aware Grandma gave extra attention to their cousin, but it doesn't bother them. They just figure she had her reasons. They have happy memories of Grandma too, and probably cherish their memories more than the other grandchild. My children all showed up in Mom's final days to say goodbye to her, comfort her, and mourn her loss. The "spoiled" child ? She was no where to be found until the funeral. Couldn't be bothered. She waltzed into the funeral with a "date" on her arm that no one approved of, and left quickly when she realized things were not "all about her".
If you let your kids take the lead and if you can see that they are not bothered by this, if you can answer all questions that come up in an honest, but kind and compassionate way, and if when you don't know the answer to a question you are honest with them and say "Sweetheart, I just don't know the answer to that", I think your kids will be just fine.
Don't focus on changing Grandma, it's a losing battle and you are setting yourself up for misery. Just focus on teaching your children and yourself to have compassion, tolerance, and an understanding that life won't always turn out the way we think it should, but that can have benefits of it's own.
I understand your feelings, and I wish you well.