Valentine, I know what a trauma it is to have your child taken away in handcuffs, particularly in front of a younger child. To explain to the younger one, though, I did not ever say "jail," and if she had ever asked me that, I would have said that was not true. (It is not technically called that for a juvenile, after all.) I explained that the police had to take difficult child to "big girl time out." She could relate to that. When can she get out? (the follow-up question): When she has had enough time to think about how to behave, just like other "time out."
When difficult child was hospitalized, I NEVER used the word "hospital." I explained that she was in a special school to help her learn how to be nicer to other people. (Younger one had already named up the "mean" behavior that was happening--impossible to deny--so this was a natural way to explain why she was there.) When will she come home? When the teachers think she is ready, when she has learned the lessons she needs to learn.
For YOU, have you been in contact with your own doctor? Your little one will take cues from you, and the medication I was able to get--temporarily--to help me be more functional through the shock phases, helped her and me both.
I'm so sorry for what you're going through today.