E.J.
She is not picking up on your hints, so the next best thing is to kindly be direct.
"You know Sally..it seems like you only want to talk about your divorce. I think I need a break and I will let you know when I'm ready for you to confide in me again. So for now let's take a break from it and talk about other things".
Odds are once you stick to this, and she finds she can't vent to you, she will find another ear to listen.
As far as your child, the next time you see her child bullying yours I would address it directly to her and kindly say, "I want the kids to take a break from each other until this bullying is over". And then keep them separate.
This person doesn't want to solve her problems, she wants to stay a victim. When you start making her accountable for her role in the problem, it will force her to take action which she does not want to do and then she will start to avoid you.
Just do it kindly to avoid any backlash since you will still run into her at school functions.