Read the top of form IMM 5481 again. It says:
This form is to be completed by persons who want to sponsor their spouse, common-law partner, conjugal partner, or dependent children who have no dependent children of their own.
The question to ask your wife is whether her children are dependent on her?
1. if they are dependent on her and have no dependent children of their own - fill form IMM 5481.
2. if they are dependent on her and have dependent children themselves - fill form IMM 1283 instead. The reason CIC wants people to use this form instead is to ensure that they have enough money to support their family(i.e. themselves, their wife/husband, their dependent children and dependent grand-children). In this scenario, you will have to meet LICO in order to sponsor them.