Hi, M.,
I would say that what you are doing now is appropriate... she sounds like a bitter old woman, who is lonely and who does not deal with loss or change very well. As for coping, this will sound lame but it's what i do with people that get me angry untill i can go somewhere and vent... I'd let everything roll off my back like water. unless she gets help she will always be like that... so when she gets difficult smile at her, nod, then do what you need to. Consider her feelings but don't go crazy trying to please her. And for your husband; he needs to uderstand that she DOES make things extremely difficult for you, and needs to be supportive, though it sounds like he's a bit of an enabler by letting her do what she wants and not putting HIS foot down. The only other thing i can say is to try and have a discussion WITH her. Tell her how her behavior makes you feel and ask her if that is an intentional side effect, force her to acknowledge(if you can) that her behavior is childish, rude and unacceptible to everyone she comes into contact with.
hope this helps
-N.