OP,
Lots of excellent advice from PPs on the calling out of racism/ improving your assertiveness to feel able to do so.
I'm zero tolerance for such comments, but I can understand how your circumstances make telling her to do one far harder.
After 3yrs, I'd assume your charming neighbour is well aware that her (and her husband's) views make you uncomfortable, and is perversely enjoying the power games of seeing you conflicted yet unchallenging.
She's relying on your fear of neighbourly or school gate awkwardness (and not wanting to complicate the kids' friendships), plus any future need for her babysitting help, to overrule your true thoughts of blatantly cutting her out of your life.
It's the old divide-and-rule tactic: forceful personality gossips and bitches about a group's individuals to each of the others in turn...
Might you be feeling pressured to keep on her good side in the hope that makes you less of a target yourself?
Rarely works.
Until you're confident enough to deal with her offensiveness openly, your best bet is to keep reducing time spent with her. Especially re your DC.
Your managerial position possibility actually gives you the perfect excuse to change the dynamic:
claim that, pre-application, you're having to get up to scratch on masses of X workplace policy/ Y legislation (you might pointedly throw in the term "Equality and Diversity" here).
The only free time you have to cram for it overlaps with school pick-up: now means headphones on, concentrating on mp3 downloads all the way. (Up to her if she still pitches up alongside; she'll soon quit when no audience for her nastiness proves dull...).
Or decide a new fitness regime means squeezing in 30mins walk/ run, so you'll now be arriving at school pick-up from entirely the opposite direction. Shame, that...