God I could have written this a couple of years ago. You are not alone.
I had a very difficult SIL, I say had as we get on a lot better now. Similar situation, very bossy and opinionated and would always come out with some snappy comment, I felt designed to put me down. It got to such an extent over my wedding that I was seriously looking at getting married abroad as far away as possible so that no one would come.
The stinger was though that I felt my husband didn't support me, he didn't and copped out saying he hadn't realised it was as bad as it was. I still don't believe that, basically because he is very sensitive and smart about people and aware of what is going on (he 'knows' her and knew what she was like). I think he had a role in the family that was to smooth things over and being diplomatic and didn't want to / know how to stop this role. I think if he'd backed me up a couple of times, it wouldn't have been as bad as it was.
Sorry, long backstory, buts its cathartic for me. Anyway what worked for me was seeing her as little as possible, DH apologising for his behviour and having a more united front. I also snapped back at the sharp one liners, because I felt better about and it did make her step back. Our DS's get on really well so that helped to heal it also, she wanted her DS to be happy so made more of an effort. Its not perfect now but its a lot nicer and family get togethers are a lot better, we have even been on holiday with them. PIL were aware of what was happening, I'm sure, but kept out of it .
Anyway, DH needs to get some backbone, and he must back you up. See less of her at the moment but don't say something that you will regret later as it may improve and your children do like eachother. Good luck.