Is she lazy or is there a reason behind that?
That seems really irresponsible to me....there are rules when you are an adult and if you are never thought to respect any rules or boundaries, how the heck can you manage as an adult?
Not only that, surely she can that her children behave differently (like outta control) to other children.

I think you approached it admirably. Perhaps your next chat with her suggest that the fact that they have no boundaries, particularly in relation to their own safety makes you anxious and feel unable to look after them properly? I really don't know..that's really tough.
I agree with LZ too. YOur house, your rules. If they can't follow them, they can't come.

And yes, we talk about stuff with DD in particular all the time. I even use phrases like 'not negotiable' (when it's a safety issue) and 'not acceptable' and then give them the reasons.