Is her note legal since it was not notarized or witnessed?

There is important information missing. If the Wills and note were entirely in her own handwriting and there was nothing typed on the papers that are the Wills, there is no need for a witness to the Will. If any part was typed, there has to be two witnesses for it to be valid. The handwritten note would probably be binding to void the second Will. The language of the Will determines who inherits; if it merely says my husband and not my husband if he still is alive, then it goes to the heirs of her husband. I do not know how valuable the watch is, but you probably would have to take all the writings to an attorney to see what the legal results are in your state.

The question revolves around if the facts that can be proved in court establish that both Wills were revoked. It is likely that the second Will revoked the first Will. It is likely that writing void on the second Will revoked the second Will. The unwitnessed statement will not resurrect the first Will and do not create a new Will because the proper formalities to create a Will or amend a Will were not present. Such formalities are not required to revoke a Will. If both Wills are revoked the the estate is equally divided among her children because she has no surviving spouse. The descendants of a predeceased child equally divide the share of the predeceased child.

If the 1987 Will still exist, then it would be valid.

Your summary is a bit confusing, but I would suggest that you take all of the paperwork to a lawyer to review. The court will try to enforce her wishes, but it may take some sorting out.

This is a very complex scenario, and the documents involved really should be reviewed by a lawyer first hand. However, with the understanding that no lawyer-client relationship is formed, and I do not represent you, I will take a shot at answering as best I can. Writing "VOID" on her will probably (not certainly, but probably) revokes that will. If the original of the 1987 will still exists and can be found, then it may (not certainly, but may) be "revived" by the revocation of the later will, so that the 1987 will may be valid (assuming it was properly witnessed in the first place). I think, from what you wrote, that would mean that your daughter gets a watch and her son (the surviving son) gets everything else. However, it is possible that the result is that she died without a will. In that case, the children of her deceased son might inherit a share. My question to you would be, what is at stake? Did mother-in-law have to spend all her money on care at the end of her life, so there is little left? Or is there a large amount that might be inherited by her descendants? If the latter, you should get a lawyer to review the relevant documents immediately, and then you can make a plan.

Suggest you seek the assistance of a probate attorney. Looks like no will is in place; if there is an estate, then a probate of the estate will be required.

She could revoke the 1998 will without witnesses or a notary, but she needed witnesses to bring back the terms of the 1987 will. So, now that she revoked her last will, she has no valid will. Therefore, her estate should be distributed by the laws of "intestacy". These laws are different in each state, but they basically set the rules for who are the heirs by virtue of being next-of-kin. In your case, your daughter is probably an heir because she is a granddaughter.

You really need to take all of this to a local probate attorney. It may very well depend on the law of the state in which the will was written.

This sounds like a Bar exam question; only add: What are the rights and liabilities of the parties? Seriously, you should see a probate lawyer, as this question is far too broad in scope for this forum.