Though I doubt your neighbor would steal your dog, it's better if she and her kids didn't go into your yard or play with him while you weren't around. It's putting your dog's life in the hands of people you don't know all that well, and have other priorities, like having fun with the neighbor's puppy or protecting her kids from a pit bull. Careless handling could give rise to future bad behavior on his part, or (worst case) an incident you didn't witness could endanger your dog's life if the neighbor or her kids get injured. I really wouldn't want other people playing with my young, impressionable dog, esp. a pit bull type, without my direct supervision.
I'd be direct, and tell her that Shadow loves to play, and loves her and her family, but you don't want any accidents to happen so please ask before coming over. If she protests, just tell her your insurance is an issue, especially because of Shadow's breed, and it's just so unfair but you know how it is...