I agree with the separate kids room idea. Your FMIL has a very valid concern regarding the safety of the children and the potential liability issues. If god forbid something tragic happened and the proper precautions weren't taken (i.e. a fence around the pool, inadequate supervision, etc), the homeowner can be liable. The kids room will allow the parents to enjoy themselves without worrying about their children falling in the pool. If I were a parent, I would still be watching my kid like a hawk whether there was a lifeguard or not. I assume the room is in the house and wouldn't be but a couple steps away. To be honest, I find it a bit strange that the kids couldn't watch a movie/play with other kids without being emotionally distraught to the point of not being able to cope. This is part of the socialization process.
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