How do you feel about the elderly?  

Maybe you should let them move in but for quite some time only. It's good to help people especially those who's in need. You would not know if you maybe one time you'll experience the same way. :)

I have offered my parents to live with us but they refuse all the time. My parents don't like any of the people me or my brother have chosen in our lives. I think right now they enjoy their freedom, although they are over 65. They live like an hour away and I try to visit them as much as possible. I don't know what I will do if they really become disabled. I would feel bad dragging them over to my house against their will because to tell you I think at that point they would rather go to some assisted living. I wish I had the money to build some suite for them too. Or even buy them some small home near me to let them have their freedom. My mother in law is the same way. She does not want to live with none of her kids. She had a bad experience before when she tried so she'd rather do things on her own.

This is a sad situation that your friends are in. Yes, I believe that adult children need to assist their elderly parents. If the parents are in need of a place to live and it is an impossible situation to living together and they cannot afford to build an "in-law" cottage, then they should help them find an assistant living community for the elderly. It is not the place of friends to assist the parents of adult children, unfortunately it does happen.
If I were in your shoes, having to make this huge decision as to whether to allow your friends to move temporarily in to your "in-law" cottage, I would get a clear understanding from them as to how long the temporary stay is going to be. I would also be a little concerned if I had not heard from them for sometime(years)and all of a sudden, I am their best friend.
You stated that you are over 60 years of age, and that you use the "in-law cottage as your sanctuary when you need to be alone. The question is, are you willing to give up your peace and quiet for awhile, so that your friend may have a place to stay?
If you choose to help your friends out, you all should have a serious discussion, leaving no stone unturned so that everyone is on the same page of expectancy.

I too am well over 60. You paint a gruesome picture, indeed. However, I will ask you if your friends are truly as helpless as they make out to be. Do the children see through them. Sometimes it is not the children to blame for the problems of the elderly. Some seniors bring it on themseves with their attitudes. They sit down and start moaning and groaning and expect the world to be handed to them on a platter because they believe the world owes it to them. They stop doing anything for themselves. I ask you to listen carefully to their voice. Is it whiny? Have they tried to help their children in any way? They may not have much money, but can they wash the dishes? Can they make breakfast? Can they put a load of clothes in the washer? Can they fold the towels when they get dry? Do they ever smile? an they walk to the corner and back?

If they are in their daughter's house, it should not be hard to follow her rules. They can't come in someone else' house and be boss, even their daughter's. If they are sleeping on her couch, they should get up early and get dressed so her living room does not look crappy all of the time. Try to make it easy on the daughter.

If they move in with you, they will sit down on you the same way. I'm sure they have problems, but I would bet the ranch they created 90% of them.

To answer your question, think twice. Don't do that to yourself and your wife. If there is a way, contact the daughter and find out what is really going on. Get the truth.