Margaret probably ignores her children because they are a tie to a life that she has decided to leave behind.
The merman tells his children to call to their mother so that she will come home again; she left their home below the sea to go to a little gray church on land and attend religious services. However, she has decided not to come home again. Instead, she is going to stay and live her life on land where they cannot join her.
It seems likely that Margaret ignores her children because if she heeds their calls and even goes to visit them, she'll be tempted to return to the sea. The faith that drew her back to land is something she feels strongly enough about that she denies the urge to answer her children and go back to the sea. She chooses it over her children; she chooses it over her own desire to return.
Margaret clearly cared about her children and was happy in her life in the sea. She probably knows that answering them will be enough to pull her from her faith. She says that she'll lose her soul with her merman under the sea. Perhaps she thinks that the sound of her children calling her is another lure that might cause her to lose her soul.