Issues with in-laws are so tough. And, as the length of this post shows, I have some experience with the same problem. But IMO it isn't a matter of "spoiling" so much as it's a problem with listening and respecting boundaries. The whole "I'm the grandma. I can do what I want!" mentality is selfish and disrespectful--and that isn't spoiling, that's Grandma Dictatorship lol. I'm not saying grandparents can't have fun with their grands. They should be allowed to do fun things (and buy fun things), but that doesn't mean they should go against the parents. If "having fun and bending the rules sometimes" is spoiling, that's okay and I get that. Like, my dad gave DS an extra cookie for dessert, but I know if I'd said "Nope," then he'd wouldn't have given the cookie *because he respects me as the parent*) But constantly buying more than was asked for and not listening when you ask/tell grandparents not to do something isn't appropriate. That's not spoiling: that's just plain disrespectful.
It took a long time to get my ILs, who have more money than they know what to do with, to understand that we are trying to cut back on "stuff." Like others have mentioned, we have asked for Experiences instead of toys. The zoo is great because it's a place you all can go and they can see their grands enjoy the gift. Perhaps there's something like that you could ask for? We have a "one in, one out" toy rule. It doesn't just apply to MIL's stuff, but her insane amount of stuff is why we started it. MIL finally understood we meant business when she came to visit and the hundred-dollar toy she'd sent DS "just because" was nowhere to be seen. I had never given it to him: it went straight to the donation pile. And then she started trying to sneak toys to the kids. That's when I had the "one in, one out" convo with the kids right in front of her. They decided to keep some of the stuff she'd brought but some of it went straight to the donation pile. She looked shocked, but this isn't about her ego; it's about keeping the chaos in my house under control and about making sure my children don't grow up to be entitled brats.
And having said that, I'd also like to point out that once a gift is given, the giver has no control over what happens to it. Don't feel guilty if you donate/throw out stuff your MIL gives your kids. Donating items can be a good way to teach your kids about helping others, which encourages empathy. I know you're worried about their financial situation, but right now it seems like the urgent issue is curbing their spending on your kids because it is causing you stress and it affects how you are trying to raise your children. And if you're worried about their financial health, that could be a separate conversation you and your DH have with them that is unrelated to the "spoiling" issue.
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