Absolutely NO history of any diabetes (type 1 or type 2) in my family.
However, I did find out that Type 1, being an auto-immune disease, does tend to show up in families that have other auto-immune diseases. My father had, and I now have, Rheumatoid Arthritis, which is also an auto-immune disease. I specifically asked the doctors at La Rabida if there is a connective link between the two diseases, and they said that there is a high probability of a link. It is not a direct causal effect link. However they do know that if a child gets Type 1 Diabetes, there is a very high probability that others in her family also suffer from any of a number of different auto-immune diseases.
So in your case, if your FIL had Type 1 (which is uncertain) then there is a possibility anyone down his bloodline could also have a similar, but not necessarily identical auto-immune disease. Further, as you have indicated here on the Forums, you have mild RA, which is an auto-immune disease. So now both sides of your children's blood lines have some auto-immune disease history. I honestly don't know what the 'odds' are for your kids, grandkids, etc getting any of the auto-immune diseases are, but I'd guess they are 'higher' than if you didn't have that type of history in your family.
You may want to try to dig a bit to see if you can confirm if your FIL had Type 1 or Type 2 Diabetes.