The women, including the children's mother, goaded the tearful brother and sister to punch each other and even use a magazine and hairbrush as weapons. When the boy, who was in a nappy, stopped fighting they called him a "wimp" and "bloody faggot".
Passing sentence at Plymouth crown court, Judge Francis Gilbert said the video taken of the fight was "shocking".
He said: "You laughed at them, you mocked them, you swore at them. You compelled them to hit each other even though they clearly did not want to. You were cruel, callous, clearly causing the children to hurt each other for your own pleasure."
He singled out the children's grandmother, who had told police that she saw nothing wrong with what they had done as it would "toughen them up".
But the judge was persuaded not to jail them immediately, instead giving the four a one-year suspended sentence and ordering them to do 100 hours of community work.
The court was told how the mother of the children, Zara Care, 21, and her sisters, Serenza Olver, 29, and Danielle Olver, 19, had met at the home of their mother, Carole Olver, 48.
They formed a circle in the living room around the children, a three-year-old girl and a boy of two, and urged them to fight while Zara Care capturing the whole episode on video.
In the film up to six adults, including a man, are seen chatting and smoking. As the two children run around the room, one of the women can be heard to say to them, "Do you want to play?' before pushing the boy towards the girl.
The children start circling and slapping each other - goaded by four women, who can be seen and heard laughing.
The boy, who is wearing just a nappy and a T-shirt, is then floored by a blow from his sister and lies on the floor crying.
After clambering on to an armchair to escape, he buries his head under a cushion but a woman in the room tells him: "Get up - don't be a wimp all your life."
He staggers to his feet and punches his sister in the mouth, and, as she falls to the ground, is encouraged to kick her.
A female voice says: "And again, whilst she's down, boot her."
He then tries to leave the room but an older child blocks his path and the girl again runs over and pummels his back with her fists.
The boy is then told by a female voice: "Get up and punch her, you bloody faggot."
He tries to refuse, but then grabs a large black hairbrush and begins to beat his sister, while a woman is heard to say: "He needs weapons, she just has a fist."
The girl is caught in the mouth by the brush and begins to scream and lifts her arm in the air, appealing for help from an unseen adult - but is turned away.
At this point, an older child in the room can be heard to say: "Is it our turn yet?" The film ends with the two toddlers screaming and crying, and an adult saying: "That's enough."
During the video the women hurl a stream of orders, such as "jump on him", "kick her" and "hit his face".
The word "punch" is heard more than 20 times. The video came to light after the children's father, a serving soldier, returned from Iraq and decided to show his parents footage from the video camera the women used.
He had expected it to feature the children playing but he was horrified to come upon the eight-minute film of them fighting.
David Gittins, prosecuting, said that the father compared what he saw to a "dog fight" and was reduced to tears. He subsequently went to social services, who called in police.
The children's grandmother, a mother of eight, showed no remorse when she was interviewed, insisting it would "harden" them up, it was stated.
The judge criticised her for still seeming defiant. The three other defendants wept as the offence was described.
Defending the women, who admitted child cruelty offences, Rupert Taylor said they were not wicked.
The three daughters had never been in trouble with the police before. But they were ill-educated, had few advantages in life, and did not realise what they were doing was abhorrent.
Mr Taylor said that although they had treated the infants so badly, family was important for them and they were all very close. "They are ashamed and frightened," he said.
The judge said the "horror" of what they did meant it was tempting to jail them.
But the judge added that he took into account the fact that two of the women, Serenza and Danielle, had children of their own to look after - and also said that Zara's biggest punishment was that her children had been taken out of her care and were now being looked after by other relatives.
Backstory
Zara Care, 21
Separated from her husband, father of the children, by sending him a text message. Had what was described in court as a desperately sad childhood. Suffered bullying and contemplated killing herself. Resigned to never getting back her children, who are being cared for by her estranged husband's family.
Carole Olver, 49
Grandmother of the children. A mother of eight. Court was told she had suffered at hands of a violent partner and spent her life protecting her children from him. Had no other achievements, apart from her large and, usually, reasonably happy family.
Serenza Olver, 29
Has two children of school age. Had attempted to kill herself over failed relationships. Said to be terrified that her own children could still be taken away by social services.
Danielle Olver, 19
The woman who put a stop to the fight. Has a year-old child herself. Described as having no educational achievements and not having had a meaningful job.
Sickening doesn't really even come close! Then there is this from the judge:
"But they were ill-educated, had few advantages in life, and did not realise what they were doing was abhorrent."
It does NOT take an "education" to teach a human being that forcing toddlers to beat each other senseless is abhorrent. Amongst HUMAN BEINGS that knowledge comes naturally.
These women, like all psychopaths, are not human beings, they merely look like them. That's a hard thing to accept, but read the story again and tell me that those are actions you could imagine ever taking under any circumstances. Unless, of course, you are a psychopath.