I would say that the most important thing that will influence how you handle this situation is how your parents interact with you and your children. Do they respect you (despite the fact that you went off their derech, so to speak)? How far away from them are you and how often will you be seeing them. Will there ever be instances that they will be with you and your family on Shabbos/YT?
I was very fortunate in that my parents, while not willing to change their lives, were supportive of what I did with my life and I was extremely fortunate that my 2 sisters also became BT with their families and so basically it was all of my parents children who were shomrei Torah umitzvos. When my father was with us, he always wore a kippa, but he did not dress yeshivish at all. My mother would cover her hair – interestingly only for me and my children but not for my sisters, perhaps because they grew into yiddishkeit in the same city as my parents and my parents were with them all through the process, but I became frum more or less in EY and went even further than my sisters did.
My mother was much more supportive than my father, but he still would go to shul with my brothers-in-law and nephews. He was not able to walk distances in his later years, so he did drive, but tried to hide it from people, especially the children. I don’t know if he fooled anybody, but at least it wasn’t “in your face”. My mother would stay with us on Shabbos when I came to visit and she would always make sure that anything questionable she did (like put on makeup), she did in private.
So I think that how you will tell your children will depend on what your parents are willing to do at least for appearances when they are with you. No one is telling them to change their lives, but maybe they’ll do little things for the sake of their grandchildren.