Leanna,
My Mom has dementia; it comes on slowly and only gets worse with time. Google dementia (look for a good medical site to research) and see if the symptoms describe your mother-in-laws behavior. Mom got so bad we had to place her in a care facility for the elderly, she resides in the dementia ward. She will be 90 in a few weeks and her dementia really didnt start until this last year, mostly because of falls and sickness.
My father passed away in 1997, my parents were married over 50 years. It took my Mom over a year to get through the grief; she was in her mid-70s at that time. Mom had depression pretty bad for quite some time.
She would come and stay with us for months back when she was healthier. She lives in Michigan, that's where I was raised and all my siblings still live there. So my brother and I would do the "blue hair transfer" to give my brother a break. Mom didn't suffer from dementia back then, but she could be a bit of a pain at times...I guess that's just the way some old folks can get.
Tell Billy he may want to take her to the family doctor to get he checked for the confusion (seeing people who are not there) and checked for possible depression.
Good luck.