I can understand your concern, but it needs to be balanced against the treat for your children.
I would be seriously worried, but if I was sure that the garden was secure, and that an adult was 'on watch', I would let it go ahead.
I can see that your in-laws saw no problem with the arrangement, in hindsight, i am sure they would have run it by you first and reassured you of the safety of the children.
The way to approach it is with an apology first if you got a bit heated - explain it was a bit of a shock, but that you have thought it over, and can see that everything was fine, and you have no wish to infer that your in-laws compromised the safety of the childrenn.
Hopefully it will all be sorted after that, and yoyu can sort out some mutually agreeable ground rules for a repeat next time.