My LO is always talking about her family (children) as though they live with us (2nd marriage ) along with other things. Any advice?

This is part of the desease. As one of our members is known to say "her brain is broken". As ur wife goes thru the stages of Dementia part of the brain dies. They forget how to write a check, how to keep a checkbook, can't tell the difference between a wireless phone and the TV remote. They talk, but make no sense. You can't teach them or expect them to comprehend because they no longer have short term memory. But they do have longterm memory. But then, those memories get all mixed up inside their heads. TV and dreams become part of their reality.