Kiora Leaving aside the issues of the other family members, your MiL really needs someone to convince her that LPA needs to be set up. If she is already showing signs of dementia, she will need to be checked by a doctor who can confirm that, despite her symptoms, she is still capable of understanding what she is doing and signing.
Would her doctor be open to the idea of approaching the subject with her? She may be susceptible to the idea that he/she is an authority figure and so more willing to take his/her advice?
We spent ages trying to convince my OH's aunt to do it and she didn't think it was necessary as she was still 'all there'. We couldn't get it through to her that, if she was ill/had an accident etc, no-one could help with pension, banking, bills etc. Then she had The Fall . . . That tipped the scales in favour of doing the LPA and it's been a lifesaver! We live over 200 miles away from her, so the document has been so useful.
Both my OH and I have already done ours, even though we're both in good health and sound of mind. I couldn't bear to think of all the problems that would arise for the DCs otherwise. We have each other and the DCs as our attorneys, so all eventualities should be covered!
Good luck with whatever you decide to do