Your posts read like you hate her and love him, I suspect she’s picked up on this and probably feels similar too. You speak about her with a shocking and uncomfortable to read lack of empathy, yet seem to be very empathetic to BIL. It’s odd. And this will be fuelling a lot of her defensiveness.
I feel a bit sorry for her really, he’s got a lovely new girlfriend, two properties, owns a business and is wealthy, probably a decent pension pot, somewhere to immediately house the girls, and the support of her family.
She’s got no job or career, likely would need retraining to get back into the workplace, small to no pension, no immediate housing for herself let alone the girls, no partner and seemingly very little support from her family who are rallying round her ex.
I’m not at all saying how she’s acting is okay fyi. But I can to some extent understand why she might feel bitter and defensive and why she might be lashing out at people. Could you not be more compassionate of the situation? She’s likely depressed and scared, people who act angry and bluster a lot in difficult situations, usually beneath that is a very scared and worried person.
I don’t agree that you should cut BIL off but I do think you should put her first, I certainly wouldn’t be having him at family parties where she will be. And I’d ask DH to pull back from having him in the house for the time being. At least until the dust settles.