For my personal sanity, and the sake of marital harmony, I eventually washed my hands of the deal. Not that I didn't support my wife emotionally, but whenever the legality of all this came up I gave my standard smartass answer; "Maybe you should talk to an expert on this subject and get some competent advice."
Ultimately they allowed SIL an offset of her share equal to the remaining amount owed, and forgave the interest. I have no idea how this was accounted for in any report to the court, as the executrix continued to be a poor communicator right up the the bitter end (which was about two months ago). The majority of the heirs were by then desperate to get the remainder of the money in the estate and signed off on a waiver to forgo a final accounting.
As somebody previously wrote in this thread, there are no "estate police", and absent anyone raising a formal complaint the issue did not extend beyond the family's effort to work it out.
DW wanted at least an informal accounting of where all the money went, but by then one BiL was desperate for the money, the SiL who owed the debt was desperate for the money (but she has a nice Corvette), and the others didn't care one way or the other. So the Princess caved and signed the waiver just to get the beggars off her back.
Other than not marrying into a family of crazy people with no clue how to manage money, my best advice would be to get the heirs to communicate with each other. It is especially important for the executor to be as open and up front as possible about everything. If we could just follow the wisdom of Rodney King and "all get along", this sort of thing becomes a non-issue.
Or so I imagine it works out that way in sane families.