This isn't a difficult situation or a difficult conversation.

It is only difficult if you keep it in your mind and let it fester.

I'd return the $20 checks to your mother with a note informing her you gifted the children $25 each, on her behalf.

Oh, she "knows" imo :(. You're not out of line to call her on it either. I'd simply let my "kid" know I thought it was bs too and kick in the extra $5. It isn't about the $ anyways...your kids already know "what's what" ;)

Just ask her to be fair and send each kid the same amount - $20. That way she is actually spending less overall.