If your FIL has lived with your SIL for 10 years, and her three (grown up) children probably almost feel like his own children, especially if there’s never been any other decent father figures on the scene for them. He probably is being very simplistic and just trying to ensure that they stay in their home. They probably filled a massive void when his wife passed and he probably does feel extremely responsible for them.
You say he’s fit and active, he could possibly have another 20-30 years of life yet, plenty of time to rethink his will.
Don’t forget, that had he lived on his own it’s highly likely he would have met a new partner/wife in the last 14 years, and if he had it’s also highly likely that he would have left everything in his will to her. Would you have questioned that as unfair?
I do recognise that it feels hurtful, but your husband has time to discuss that with your FIL in a way that respects his decision and doesn’t cause rifts. Maybe he just needs to hear your perspective, but also maybe you/husband need to hear his.