I am not a daycare provider, but in this case, even from a parent perspective, I would do as suggested above and put them on probation. The mom is being dismissive and disrespectful of your concerns. I don't think she has grasped the implications if she doesn't get on board with you.
I imagine she is downplaying it because no one wants to hear bad news about their kids...but sticking her head in the sand doesn't fix the problem. Best of luck and let us know how it goes!