K.G.
It is so hard when a couple's families do not get along. I can truly empathize. All you are trying to do is have a nice holiday for your family, and you have to have the additional stress of machinating everyone. My advice, after MANY years of stress over the holidays is thus:
1. Have separate events. I dont care what Emily Post said in the past, nowadays, it is perfectly acceptable to keep those families apart. Together, they are, as you say, toxic. So why do it? Clearly, there is no benefit for you, your husband or the kids.
2. Focus on what YOU and your husband/kids want to do. If your extended families' want to follow suit, then great. If not, then great too.
3. Do try and make it nice for the kids and for Grandma, but dont compromise yourself. It will only result in years of frustration and a dread of the upcoming holidays.
4. If you MUST have the entire group, I STRONGLY suggest that you ALWAYS invite an outside member. Invite one of your friends or your husbands who are not very close with your family. This will make everyone behave better. Trust me, it works like a charm!
5. Dont let either party "take you aside". That just isnt fair to you. You can say lovingly that you no longer feel that behavior is appropriate, you love them both, but want to focus on the holiday, not their feud. Let them grow up and learn how to behave in a social setting. If they cannot, then definitely have separate parties.
I hope that helps. I can so relate to your stress and sad feelings. Please feel free to email me separately anytime!