@Bullsfan,
I feel for you. And if you don't feel comfortable with him, and I assume your wife is kind of in that camp as well, then your natural desire is to just avoid him. Which helps you but doesn't do anything for your mother in law.
A lot of people who are abused seem to have such pancaked self-esteem that they think they deserve it. Or she might be rationalizing it as being okay because he doesn't hit her, or because she's put in so much time already (that's a kind of sunk-cost/gambler's fallacy, that
the more quarters I put into this machine, the more likely I will get a payoff because I deserve it because I've invested so much time and money already), or she feels she can't start over again.
Or, the world might scare her. I don't know anyone's ages, but I'll give you a for-instance from my own life. My parents get along wonderfully. They are also in their mid-eighties. My mother is a smart woman (as in, she has a Master's of Library Science), yet she has clutched my sleeve, more than once, and said to me,
"J___, if your father goes before I do, please promise me you'll handle paying the bills and the taxes." And of course I say yes because I love them both. It's not that she doesn't have brainpower; it's more that it's something so new and different for her because my father has always taken care of this.
I write this not to rat out my mother (God, I hope I'm a better daughter than that!), just more to give an example. Maybe some of that is the case with your mother in law? I'm shooting in the dark here because I don't know any of you, but that might be a fear, that she feels stuck and makes the best of it because to change seems so horribly daunting.
So the question is, how willing are you, your wife (and I think you said you also had a sister in law?), etc. to build her up, tell her she's valuable and worthwhile and loved (which is lovely for anyone to hear), and see if you can help give her tools to be more independent (or find a place where she can get life skills or the like). Not necessarily to prepare her for a separation (although that or a divorce would probably be the best things that ever happened to her if she went in that direction - but I wouldn't bring that up with her if I were you), but more to be more self-reliant. She will feel better and more likely to not take his crap if she feels she's valuable and smart, etc.
Sigh. I don't envy you. You're a good guy for caring about what happens to her.