September 20, 2010 12:00 PM

After taking a romantic late-summer Hawaiian getaway with beau Jason Trawick, Britney Spears headed back to L.A. for Labor Day weekend. Not so long ago the singer might have spent the holiday partying and driving the streets of Hollywood. But this time her only plan was to kick back at her place with her three favorite guys: Trawick, 38, and sons Preston, 5, and Jayden, 4. In fact, says an insider, “they didn’t head out at all.”

If that sounds a bit dull, it’s a welcome change in a life once defined by drama. After being hospitalized for mental illness in 2008, Spears, 28, has traded chaos for a more laid-back life. “She’s doing a lot better these days,” says a source who has known her for years. “She’s come a long way.” Once known for her tearful outbursts, Spears can’t stop smiling-chalk it up to a thriving romance with Trawick, excitement over an upcoming guest spot on Glee and seeing herself land the No. 6 spot on the Forbes Celebrity 100 list (her Circus tour last year took in $130 million). Best of all, friends say she’s enjoyed a quiet summer bonding with her sons. “It’s pretty exciting for her,” says the insider of all the good news. “She’s doing great.”

Those closest to the pop star say she has always been happiest when she’s busy. And between motherhood (she shares custody with ex Kevin Federline, 32) and music (she’s working on a new album), there has been little time for her to give in to the demons that provoked her instability. “She is always so happy when she has a focus,” a source close to Spears’ family says of the singer, who spends her downtime tanning by the pool, shopping online, exercising and watching movies. “Britney gets very depressed when she sits around the house.”

After being placed in emergency psychiatric care in ’08, Spears temporarily lost custody of her sons-an experience she is determined not to repeat. “Britney has made a lot of progress with her boys this year and seems more in tune about their needs,” says the source close to her family. (The singer took court-ordered parenting classes after her split with Federline.) “She tries to plan fun activities she and the boys can share,” adds the source. “The boys love Disneyland and going to the movies, and it’s cute to see how excited she is when she gets to share fun outings with them.” With the help of a full-time nanny, the Louisiana native is also trying to instill good values and discipline. “She is big on her boys using ‘please’ and ‘thank you,'” says the source. The positive impact is reciprocal: “Preston and Jayden make her extremely happy, and she would never do anything to jeopardize her relationship with them again,” says the source. “She’ll make sure to stay healthy for them.”

How healthy is she? According to people close to Spears, she is getting help for depression and mood swings. (In the past, two separate sources close to the singer told PEOPLE she may suffer from bipolar disorder.) Just as important, her protective inner circle, which includes Trawick, her family (“She is more involved with them now than ever before,” says a family friend in her hometown of Kentwood, La.) and former assistant Brett Miller, helps keep Spears healthy. “She is surrounded now by people who aren’t taking advantage of her,” says the source who has known the pop star for years. “They’re trying to make sure she does the right thing. She’s in much better hands.”

The most important force in Spears’ life remains her father, Jamie, who controls her comings and goings as well as her vast fortune (both with court supervision) through a conservatorship established after the ’08 hospitalization. Once he got involved, things started turning around for her, but to this day, says the insider, “nobody knows when it will end.” The source close to her family says Spears “is constantly nagging and begging her dad to go to court and ask for the conservatorship to be over.” For his part, Jamie is also said to want the arrangement to end and no longer requires his daughter to ask permission to go out (though he does keep tabs on her through her bodyguards). Says the insider: “She’s really calling the shots now.”

Still, Britney won’t be completely in charge of her life until a doctor decides she’s capable of taking care of herself-and a judge agrees. “This doesn’t mean Britney has to be free of mental illness,” explains Jeffrey S. Cohen, a Los Angeles attorney specializing in conservatorships. Cohen, who has not worked with the singer, adds that “just because it’s still going doesn’t mean she’s a wreck. The court may just keep things status quo to err on the side of caution.”

No one is claiming she’s made a full recovery. “She has her moments, sure,” admits the insider, “but so does everyone.” While Glee cast members have gushed about her recently taped guest spot, the source close to the family reveals Spears had anxiety about it. “Britney gets nervous when she’s in the spotlight now because she is not used to it anymore.” Earlier this summer there were a few public spats with Trawick (though “things are great with them right now,” says the insider). There were also issues after Britney’s Circus tour ended last fall: Jamie had agreed to let her drive on her own, but he decided to rein her in after she began to show signs of her formerly erratic self. Says the source close to the family: “Britney quickly got back into her old antics of driving around aimlessly for hours.”

But that type of behavior is now the exception, not the norm. “She seems more like her pre-breakdown self,” adds the Kentwood friend. “I think she’s enjoying her life more and her family more. She seems happier than I’ve seen her in a long time.”

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