Had the same situation with my father. I personally submitted to the DMV that his mental condition is such that he should not drive. DMV sent him paperwork requiring him to get a doctor's eval. He was pissed. I lied to him and told him it was one of his doctors that must have done this. Which brings me to this; the kindest thing you can do for your dementia diagnosed loved one is to lie to them. They no longer are able to think like we do and it will get worse. I got lots of local community help and education and the biggie I got out of it was that I needed to tell my father what would make him the calmest. If it's a lie, it's a lie of kindness.
Dad's neurologist easily gave him a diagnosis of Alzheimer's. This made it very easy for me to take over all his care and finances as I have durable power of attorney for both those.
Dad also was prescribed Aricept. It was very hard on him, gave him bad headaches and ill. His neurologist said it would take a few weeks for him to get used to it. Another week and I called the neurologist again. After a very frank and honest discussion, he admitted that the drug really had no effect. Fact is; Aricept and any other med is, at most, going to make zero difference on the progress of the disease. They prescribe it because it's available, but that it usually has no benefit, or if there is, it's not enough to be worth the side effects. I took Dad off it and he was much happier. At this point, that is the goal; make dad as happy and comfortable as I can get him because when he's not, it's heartbreaking.
You are in a very difficult point now with your MIL. She can not safely live on her own nor drive and that means starting now. I equate it to wearing seat belts; you just never know when you'll need it, but when you do, it is usually a matter of life or death. The worst thing to happen is if she takes out anyone else besides harming or killing herself. If anyone is, and they or their survivor family finds out her medical condition, that family knew it, doctors knew it, had the authority to do something about it and didn't, could end up being financially liable.
My dad lived with us for about two years and while I am glad I did it, in the end, we had to get him his own place at a care facility. I could not completely Dad-proof our home and it was just too risky to keep him here without someone with eyes-on all the time. Even heating a cup of coffee in the mircrowave can be dangerous. He put a cup in and instead of 1 minute, he put in 10 minutes. The coffee boiled away and the residue caught fire. Still can smell burnt coffee in the microwave when I open the door, so it will be replaced. He's gotten into the freezer and ate the chicken scraps; giblets/fat/etc from a whole chicken that had been prepared for a dinner and these were put in the freezer until garbage pick up day. I found him in his chair, reading a book and munching on what I thought was a snack. I looked closer and it was the raw chicken parts from the freezer. I can't yell at him about it, can't even try to explain what he did was wrong or in the future he'll just hide his activities. Just take it away, give him a TUMS and hope for the best.
Make sure when you talk to her doctors that you tell them her current living conditions and to be honest and frank with you regarding the safety of this and future changes for her living conditions. If she's not there yet; needing care giving, she will very, very soon. It's better to act ahead of the need than to react to bad situations in the future.
Remember this; if she's living alone and there is an emergency, could she get out in time? At any time of the day or night? Or is there a question about that. If there is any doubt, she probably should not be living on her own.