I can empathise with your point of view.
She's a mother-in-law who feels very threatened now that there is another woman in her son's life, as she does not have complete control over him anymore, and he will be putting you above her in some situations.
Basically the apron strings have not been cut. He is still behaving like the child, answerable to his mother. She will have made it very difficult for him to disagree with her over anything - he will probably experience some kind of punishment if he tries, i.e. silent treatment, crying, spiteful comments, awkwardness, etc. So he has learned to keep the peace and do as he's told.
You can't change this situation. If I were you I would not have stopped going to family gatherings, because it gives her the opportunity to spread her own version of the story around. I would have killed her with kindness in front of others, but politely stood firm when she did things that I did not like. "No, we don't want to do that" and "I find that offensive", etc. Don't lose your temper, because it makes it look like you have the issue.
Your DH needs to get some balls and start breaking those apron strings. He can do it in small ways - "We prefer to do things this way".
He needs to ignore the punishment she deals him in return, which is not an easy thing for him to do, but can be done gradually.