Narc family member manipulates children

Hi all. I believe my brother-in-law (who displays narc traits) is trying to manipulate the family's children and kids against other family members. During any family function where children are present, the only way he interacts with them is bombarding them with questions such as "Who is the funniest?" "Who is the smartest?" "Who is the coolest?" "Who is the best?" And so on. He could go on for hours just asking those questions, which is very bizarre. Sometimes the questions vary as he picks onto certain family members, asking the kids "isn't X so weird?" "Isn't Y so rude?" "Doesn't Z look odd?" "Isn't So-and-So very mean?".

Now, since he has been always very giving to the children (in ways where he often surpassed boundaries, such as letting them watch tv or YouTube for hours on end unsupervised, failed to follow their night routine, etc) and often gave them gifts, the kids think uncle is very "cool" (of course, what child wouldn't think an adult that lets you do everything you want and never tells you no isn't cool?). As they answer the questions with his name, he seems to get so happy. He laughs and laughs and points out that they think he is the funniest, smartest, coolest, best person ever to anybody who is willing to listen. There have been times where the kids got the "wrong" answer, aka responded with another person's name instead of his to his "ego-feeding" questions. In response, he would get so very sad, uncomfortable and insecure.

I have always been puzzled by this behavior: yet since I am not the parent to the children, I don't feel like it is my place to say anything. His behavior and narc traits have been causing great tension between my husband and my brother-in-law, making it almost impossible for us lately to have a "normal" family dynamic. We are not alone, as many other family members are starting to get tired of his ways and are not interacting with him so much during meet-ups. He often has no one to talk to but the children. I still am worried about these acts as I feel like they are just grandiose ways to feed his ego. I get very annoyed and angry, because I feel like he is manipulating the kids into trusting him: I think it is somewhat dangerous, because as the adults, we have seen his "other side" when confronted, which is very hurtful and sometimes abusive. I often wonder what these children will feel when, in the future, they eventually find out that their cool and best uncle ever is in fact not at all so.

I need advice on how to view this situation, and if it can even be classified as manipulation at all. I know that "grey-rocking" is a technique that is used to deal with narcissistic individuals: me and husband have been practicing that lately with my brother-in-law and it seems to work quite well. However, I feel like I can't "not react" when children and minors are involved.