Oh goodness, I think I'm hearing descriptions of what my FIL could turn into, given a few years! It's a little scary to contemplate! He's not quite as far as making handouts, but he certainly will monopolize conversation, given a chance, and prefers to monologue at people rather than actually having a conversation.
There are two things his family does to cope with the monologuing. One, they start other conversations. They don't interrupt FIL as he's talking, just turn to another person and bring up another topic. This reduces his audience, and sometimes causes him to stop talking since we're not all hanging breathlessly on his every word.
Secondly, and I thought this was incredibly rude the first time I saw someone do it, if he won't stop talking about *whatever topic* and the person he's monologuing to isn't interested, they just leave the room. It's taken him up to fifteen minutes by my estimates to realize that the person has walked away; my DH says it sometimes takes him hours. After thinking about it, I've decided this isn't as rude as I initially thought it was. FIL is simply vocalizing his stream of conciousness thoughts; he doesn't actually need an audience, so losing an audience doesn't really matter to him. It doesn't sound like your MIL would talk to a blank wall if she got the chance (a common joke about FIL), so I don't think this would really work, except as a last resort after you've tried everything else.