I was in the same dilemma with my in-laws ... and talk about GUILT !!!
Having looked after them both for 2 years,it finally came to the stage where I was falling apart, physically and mentally. My FIL was permanently placed in a private hospital (not a nursing home, a hospital) but knew from the onset that unless he improved A HECK OF A LOT, he would't be coming home. This didn't sit well with him, and he continually asked me if he could come home. I had my hands full with my MIL who has dementia (FIL was FINE mentally, but had lung disease). I remember being called into the Nursing Unit Manager's office, and having a good talking to. I was told that I knew the entire situation was out of control and that for FIL's own good, he had to go to a nursing home. FAct being, he couldn't stay indefinately at the hospital .. they needed the beds for 'sick' people, not 'chronic disease' people.
So the day dawned, and they spoke to him about his now very limited options. He looked at me with those big blue eyes, and said "Can't I come home?" It broke my heart, and all I could do was shake my head 'no'. I did manage to say a little while later "I can nurse one person well, or two people badly" and he finally, sadly, understood and went with grace to a nursing home.
MIL on the other hand ...... *sigh* ......... ACAT took over for me. Respite was organised at a top of the line nursing home with the promise that she would basically never come home. We gently told her she was going on a holiday, but I KNEW she didn't understand, however everybody else thought she did, and everybody else thought she was great with the idea (just a holiday idea, not the ever after idea).
EVERYBODY, the professionals and the rest of the family all nodded knowingly and said "Yes, she's OK with that, she's seen Dad in the nursing home and she knows, she's ok"
I however, knew darn well that she said yes if spoken to in the right tones (gentle, smiling) and I KNEW she didn't 'get it'.
So ....... other people picked her up from day care, other people took her to this nursing home, and since I had already decorated her room with pictures, and unpacked her bag and gotten everything ready (I couldn't BE there when they dropped her off) .... and they rang me and said "everything went fine, she's very happy"
Until 7am the next morning, when the nursing home rang me and said "OMG, she can't stay here, she's uncontrollable!!!!!!!!!!!!!!!!!!"
Y'think?

~~~sigh~~~
Anyway, I had to put my foot down, and yes, they managed to find her a brilliant nursing home and guess what ..........
within 2 days of being there, she calmed down and never looked back.
What calmed her down? Her limited options. The fancy nursing home had too many options, the 2nd not so fancy one didn't.
2 days. Brilliant.
My story doesn't help you 'how' to tell your FIL, but just gives you an idea of the concept of 'how'.
I wish you luck, it's the worst time ... :-( I'm sorry.