What would you do in this situation?

I think that if you really feel that there is a chance that she will infringe on your personal life, then you need to be honest and upfront about this. It's one thing to work for her company, but watching her kids is a completely separate job. If she can't handle the fact that you have your own plans and agenda for your life, then find another job. Yes it may be a good opportunity, but it's also like a Venus fly trap waiting to happen.