You could suggest to her that she has always done the majority (or all of, however you'd like to word it to make her feel more soothed) of the work for Christmas Dinner. Explain that you'd like to do it this year to let her have a relaxing day and to let her enjoy her son and and grandchildren. My husband is one of only 2 children, and he & his sister are 17 years apart. Before my MIL passed away, my SIL's kids were in college and so my SIL wasn't in town every Christmas. That left Christmas a bit lonely for my MIL. We would insist she shared Christmas with MY families (my parents are divorced, so I have 2 Christmases for my sides of the family). Sometimes she spent the night and other times we would pick her up. My MIL & I loved each other AND got along well, so it wasn't a big hardship to do this. I even miss the things she did that drove me nuts! :)
My MIL loved having our kids over at her home, but she got nervous with their active-ness when they were in her apartment since it was small. We would take a couple/few QUIET (not completely silent) toys PER CHILD, since ours are multiples of 4 years apart (now ages 26, 22, 18, 10 & 6) and have different interests/capabilities. My MIL passed away when the 10-yr-old was 1. We would leave the majority of the "stuff" in the car and switch them out when the kids got bored. When we were over for an "everyday" dinner, we were normally there for about 4 hours and, yes, kids can get REAL bored REAL quick.
We spend Christmas Eve Dinner at my SIL's. At the time my MIL was still living, my SIL had no grandchildren and so there weren't any toys available. However, since they were receiving presents there we didn't have to bring anything. If you DO go to her home for Christmas after all, can you take a holiday movie to keep the kids partially entertained?
Hope this helps! Good Luck!