That is grammatically fine, but I suspect that it contains redundancy in the context. That is the only kind of keyboard we use nowadays.
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ReegisIn what context can I use it as a standalone sentence?Your question gives you the answer. The sentence needs context, such as someone asking "What was she doing when you saw her". The sentence cannot stand alone.
ReegisThe children who were playing near the pipe are all sick now.It is fine. They were playing in the past and they are sick at present.
Reegisso is there any difference betweenThe children who were playing near the pipe are all sick now.andThe children who played near the pipe are all sick now.In meaning? No.