You are absolutely doing the right thing here. Your child is your concern and if you question the quality of care for any valid reason (of which you have had several), you have every right to terminate the agreement.
Look over your contract (if you have one) and follow it. If there is no contract, then write a "formal letter" with your next payment stating in clear terms that you are discontinuing the sitting services and this check will serve as payment through the final date.
Dear ______,
Thank you for the care you have provided over the last ____ months. Due to personal reasons, we are electing to move ____ to a daycare center beginning August 15th. Please find enclosed a check for ______ which will address services rendered from today ______ through August 12, 2011.
Sincerely,
A. S.
If she asks, you don't need to elaborate. It's your child and your decision. Period.