OK, I have always put store in the saying "If you do what you've always done, you'll get what you've always got". You have always brushed off SIL's comments, ignored them, taken the punch. And that has got you more comments, SEVENTEEN YEARS of nasty little barbed digs. So if you want that to stop, you are going to have to stop ignoring and downplaying her behaviour. Are you up for that?
I see possibilities in "SIL has a tendency to throw tantrums / be over the top and we all tend to pussyfoot around her so as not to set her off." It's time to wind her up so that she throws tantrums. Big ones, in front of as many people as possible. Tantrumming makes adults look really really stupid.
And if anyone admonishes you for it, just respond that you're done being her personal punchbag, would they like to volunteer to take your place? No? Well this is how it's going to be from now on, thanks for your concern for MY wellbeing.
So, how best to turn her digs around so they jab her?
The example you gave - "MIL made a cake and SIL said “ooh watch out Matilda doesn’t steal it, you know she likes to take things that belong to her hee hee” " I'd be giving a calm stare and responding with 'I expect I'll eat what cake is offered to me. Has much cake been offered to you lately, SIL?' Yes, it's fucking rude and points out she's unpartnered, which normally I wouldn't do but I'm looking to provoke a tantrum here - gloves have to be off.
Consider things she's said to you lately/often, how could you turn each of these around?
Alternatively, you could start by just not taking it any more.
'Really SIL? Has so little happened in the last 17 years of your life that you still revolve around your brother's love life?'
'That's just you being rude for rudeness sake again. And before you claim you're joking - nobody's laughing. Again. Put a sock in it.'
And of course I find 'Fuck off' multipurpose.
The most important thing is that YOU CHANGE YOUR BEHAVIOUR because how you've been responding to this - well, it's not working, is it?