What can I do, can you help?

No, you are not wrong to be angry. Her actions are very inappropriate. If I were you I would explain to your boys (in the nicest way possible) that Grandma is wrong about the subject because she just never learned any better. I would definitely not let her be with the children when you are not around ever again. Not letting them wash themselves and telling them they they are "dirty, gross and ugly" is abusive no matter what beliefs she uses to justify it. If I were you I would just tell your mother-in-law that you don't feel it is healthy for the kids to stay with her if she is going to be putting ideas like that in their heads. It sounds harsh, but you need to protect your children and that comes before your mother-in-law's feelings.