L.
Yes. Unfortunately most families go through this at least once. Some kids just seem to attract the things and it seems to be the ones with the cleanest hair!
It wouldn't hurt to treat everyone in the household, but not with chemicals. Use olive oil. Saturate the hair with olive oil and wrap in a trash bag (cheaper than a shower cap) for 8 hours, then wash out the oil and nit-comb. Continue to nit-comb for at least a week every day. If you find any more bugs, you can re-treat the hair once a week, but if you get all the nits out you probably won't have to. You are already doing all the vacuuming and washing and putting stuff into plastic bags, so you should be OK.
I know it's gross to deal with those bugs, but try not to blame whomever gave them to the kids. They probably didn't know they had them. You might want to share the olive oil information with the other mom. Those chemicals they sell for lice are very toxic to children.