Hmm...well, the ambiguity is part of what makes it scary.
The woman is clearly disturbed, but I'm not convinced she's a killer. She did dislike her neighbor and his dog and got into physical conflicts with both of them. But did she kill them? Early in the story it's mentioned that the rats that she's been at war with have disappeared, which fits in with the "she's killing anything that ticks her off while in another state of mind" theory, BUT it's also said that birds are turning up dead. She has no motive to kill the birds that I can see. I think something else is killing them.
At the beginning she believes the creatures are real. She subconsciously thinks they can be a sort of substitute for her children. By the end of the story she believes that the creatures are malicious and fears being accused of their crimes. Now, if she was in "protective mother" mode she wouldn't have turned against her substitute children so easily. I think she's disturbed, but not completely deranged.
So far, I've given my reason for why I believe that the creatures are real, and why I think the woman is still somewhat rational about the danger they pose.
So why do the creatures bear a resemblance to her real children at the end? I think the creatures just like the woman and her home. Figuratively, they're like cats in the beginning. First they clear out the pests (the rats), then they leave "gifts" (the birds.) Then they take things up a notch; they become more like dogs by "defending" the woman from her neighbor and his dog. But only after she shows hostility towards them. By the end they've gone up another level and have physically taken on the appearance of the lady's children.
So, I think the creatures are real. They have an affinity for the woman, want to please her, and want to defend her. I don't think they are necessarily evil or malicious but they are dangerous - because they take all of their cues from the lady of the house and she is a very troubled woman.
^Apologies for my terrible grammar and punctuation.