Cynthi013. I am so sorry. This must such a shock after the good behaviour of your other children in the family.
Because of the young ages of these girls, I think there may be more going on behind this behaviour. I do not think you can step in and help or alter it. It is a serious sign of some deep disturbance and unhappiness. The children, the elder especially from the description you have given, need professional help and their parents need advice and support. This is where you can help. You can provide a stable, loving background that accepts the children and their mother and father and is not judgemental. This does not mean condoning very antisocial behaviour, but try not to become emotionally involved when such behaviour arises and remain calm and, while saying that such behaviour is very unkind/painful for you to hear, you think people who do it are unhappy and that you love the girls even though they are doing something that makes you feel very sad. But remain calm and try not to flare up.
When my back was slightly less painful I did some therapeutic work in short sessions. I was doing a morning of supply teaching once with children aged 5-6. One little boy was very disruptive, would not do anything asked of him and tried to leave the classroom. There were three classes together in a large area with three supply teachers and three TAs. The TAs knew the children and said that the difficult one was "always a nuisance' and made it clear he had a bad reputation for being a problem among the staff. Their Teachers were in another building setting up their new classrooms. After about an hour of difficult behaviour the little boy, big and strong for his age ("I'll call him Adam) decided to take off and was heading away across the field. I managed to catch up with him and said "I am going to hold your hand and I have to bring you back to school so you will be safe with us Adam." Then I said, and I honestly don't know why I said it, "I do not think you are a bad boy, Adam. I think you are unhappy.'' He was quiet for a brief time then said simply "I am. I am unhappy."
I gave Adam some milk - the children are given it at break, and chatted about toys for a while then he began to become involved in an activity. When the morning was ended, I went to the Head of Infants and said I was worried about Adam, that there may be a problem and that he had tried to leave the premises. I told her what I had said to him and his reply. She was astonished and said, "Not all staff know, because the parents asked not to say yet, but they had twins born early just over a week ago and one died last week and the other is very weak and might die."
Never assume a young child is being rude and nasty because they are being deliberately horrible and nasty. There is always more to it. Children naturally want to please adults. They want to be loved. When they do things to reject love there is a serious problem. Never withhold your love.
I am glad that the elder girl is having counselling, at least that means her condition has been recognised and that her parents know there is something wrong. Her mother might be being very defensive, she may feel that people criticise her and blame her for her children's behaviour. It may be that the mother is not helping the situation, but she may need help herself. Coming into an established family as the second wife where the first children are well-behaved and loved, must be rather frightening. She may feel you are critical of her and she knows her children are not behaving beautifully like her husband's first wife's children. She might feel you don't love her children or that you resent her. Her reactions are probably defensive.
I would do as your husband says, let things be for a while. Do not intrude on them. Try and make sure when you communicate with your son or DIL that they know you love and value them and their children and are so glad they are in your family.
I was concerned to read that "The oldest was removed from 2 different child care facilities for spitting, biting, etc."
Removed twice and only 7 years old! That sounds as if she is having a terribly difficult life. The behaviour indicates severe disturbance and being moved around is upsetting in itself.
You have children with very special needs here and a mother who, I believe, is struggling to survive and hold her head up. Could you muster up all your Granny love and gently nurture such difficult girls? This is a special mission and you have been chosen for it! These are two very unhappy and disturbed little girls with a mum who might be very frightened. They need someone loving, calm, stable and who loves them unconditionally, who says "we do not bite" but still cuddles the unhappy biter knowing biting is done because she feels such distress.
As I'm a praying person I will pray for you and these special girls and your son and his wife. I hope you won't mind, I know not everyone likes God being brought into things and I fully understand that. Take care of yourself. You have a lovely husband! That is a huge blessing. Try not to worry. God bless you all.