The won't insure you or they will jack up the price considerably. 

They are pretty unique conversions, it does take considerable time, effort and money!

I don't care if they're free, I don't need that!"

Are there any tax implications or considerations for Canadian investors investing in the U.S. through an LP?

If she lives rent-free, you retain control of the property but lose the ability to claim rental-related deductions.For long-term planning, consult a CPA and attorney to ensure compliance with tax rules and align ownership structure with your goals, including potential conversion to a rental or estate planning considerations.

.- Does anyone see any flaws or can offer some improvements/considerations to the financing strategy of this plan? 

Is there something I'm not taking into consideration?

Some gurus tell practicioners of sub-to to hide transaction from the lender by saying the lender doesn't care as long as the payments are being made.

I believe if your mother-in-law runs out of money that Medicaid will step in and pay for the nursing care.

Ability to repay - can you as the borrower afford the payments based on the loan amount.Typically they will not take into consideration the mortgage on a new property that has not been taken out as that is new.