Hello scrabble nut,
I understand he's your husband's brother and you feel the need to care for him because he is sick. Still I feel you have to be clear with him on what you will and will not accept.
I feel compelled to point out one thing related to the guy's SZ and the rest I feel is a general comment. Often, after one develops SZ he has negative symptoms so called because they take away from ordinary life experiences. These are symptoms such as lack of motivation, flat affect or blunted emotions, a poverty of speech. So your husband would need to examine his brother's behavior and decide if how he behaved before he got sick was totally unlike how he behaves now, to try to see if it's illness-related.
Regardless of the cause of the behavior, I feel that enabling him to act this way towards you will not help anyone involved. I would go so far as to say that you need to set boundaries, be clear on the type of behavior you will and will not accept from the guy, and that you might possibly limit your interaction with him.
It's sad because your children are his nieces and nephews and I can understand you would like them to have a better relationship with their uncle, or else if by adult children you mean the guy's own children.
I'm pretty clear on this: you should not excuse bad behavior just because someone has schizophrenia. It's possible his bad behavior has nothing to do with the illness.
Dr. Phil is often quoted as saying: We teach people how to treat us. So I feel you need to teach this guy that his behavior is unacceptable. You deserve to be treated with respect and if this disrespect continues you'll have to decide your own limits. Only I know you don't want this behavior to continue.
It might come down to making sure the guy is protected in his life so that he can live as much of a comfortable life as possible, with minimal involvement from you.
I'm not a psychologist so I don't know off the top of my head a behavioral technique you can use to combat this guy. I might suggest you go to the librarian and ask the librarian to find you a book that gives you ideas about how to combat difficult people.
The one thing I can tell you is what I already hinted at: the fact that he has schizophrenia is no excuse for his behavior.
Regards,
Christina