Well, take me not wrong at all, but, if the mother is Jewish, the children are, too. Your role, taken in this view (not personally, but as a matter of custom) is secondary. So, your Jewish in-laws, in the strictest theological sense for those of the Reformed or other non Orthodox traditions, knew their grandchildren were going to be Jewish, but the non-Jewish father presented a lack of unity, so naturally this concerned them given modern predilections to leave the faith, any faith.
Your Catholic relatives, cognizant of the maternal descent of faith according to Jewish tradition, may have lamented the generational loss of faith. If you are a Catholic believer, would you celebrate that? No!
Each side was correctly expressing their bias. And, religion, when viewed contextually, is a bias. We who admit to one confession are biased towards that confession, no?
V’s wife.
Except if they are baptized, in which case both sides consider them Christian regardless of the mother's Jewishness.