Yeah, the best hindsight observation was about building your house behind your mother.
There are several approaches you can take. One is to tell her that this is the way it is. If she is going to be judgemental, then stay at home.
Another is a more polite version of the first. Tell her that you know it is a shock to her like the stuff her generation did was a shock to her parent's generation. Ask if she really wants to talk and understand it or does she want to just condemn it blindly. Let her know that you are explaining it to help her out -- you are not looking to be talked out of it. Then you can give her the pro-poly speech if she agrees.
Another is to talk to her with you and dh present. Another is to give her some time to adjust before you talk.
As for the kids, that is tricky. There have been legal challenges in the past where grandparents have kids taken away from nonmonogamous families. However, I think they were all based on the people all living together. If you think your mother could do that, you may want to handle it differently.
To put her mind at ease, just tell her that this doesn't affect the kids except they probably get more adults in their life. Monogamnous parents don't fill their kids in on what they do in their bedroom, so why expect it from nonmonogamous parents. As long as people don't freak out around the kids, they won't see anything wrong. As they get older, they will notice it is unusual, but what family is really the norm anymore?