Yet another FOG-bound man who won't defend his wife against mummy.
Looks like you're going to have to deal with her yourself.
I'd be direct, rather than deflecting via your DC with the 'silly granny' approach.
Every single time she says something, I'd look at her without blinking and say for example
'What do you mean?'
'I don't get it, could you explain that?'
Keep up the analysis, then after she has been under the spotlight for a bit,
'Now (name), when you say xx to us, it feels like you think xx. So is that what you think about us?'
'In OUR family, we don't say unkind things things like that to each other.
'We don't want our DC hearing unkind things.
Please don't do that to us again.'
Make it absolutely clear there are you three ... and then there's her.
Always in a reasonable, polite and controlled tone of voice, words and body language so she has nothing to react to and there's nothing that might alarm your DC.
Call it out Every. Single. Time.