Boundary issues with Mother in law

Hi Brooke,
I need some advice on how to proceed with my relationship with my mother in law. She meets many of the qualifications for a narcissistic personality disorder and quite possibly bipolar disorder. She has a mental health history where she was hospitalized and prescribed medications which she has since taken herself off of.
My husband thinks she is a mean, manipulative individual who lies and twists every situation to portray herself as the victim. He has been adamant that she should not be allowed to see our children until she seeks help from a medical professional. I agree with him that she is mentally unstable and not “healthy” to be around, so I have gone along with keeping our children away from their “toxic” grandmother for now. However, your podcasts on manuals, boundaries, toxic people, and (unconditional) love constantly are echoing in my mind and have me questioning how to proceed going forward.

2 situations have occurred recently:
-Mother in law came to our house without warning to see the grandchildren and brought gifts for them (we had not seen or talked to her for 2 months prior to this). My husband came home and they had a heated discussion which ended with him asking her to leave and telling her it is not okay for her to ‘just stop by’ whenever she wants as she is not welcome to see us or the kids right now.

-A few days later, our 6 year old daughter came home from school and told me that her Grandma visited her at school and was waiting for her in the hallway outside her classroom with a fast food lunch she picked up for her.

She thinks there is nothing wrong with her behavior and that we are evil people for not letting her see her grandchildren (There’s definitely a lot more drama to this story, but I’m really trying to keep it minimal).

A friend suggested that we should try a different approach like scheduling a meeting with her in a public location to visit the children periodically for a set amount of time. I am tempted to try this, but am also worried about the effects of exposing my children (and honestly my husband and myself) to her narcissism. I am at a loss of what to do and how to even start working my mind through this situation using your model. Can you offer me any ideas on where to start and how to get to a place where there are healthy boundaries for everyone involved?
Thank you so much!