Bambino, I understand you want to go through proper protocol etc and DH ought to say something, but somehow if he does, it escalates the thing up a notch.
Sis, I need a chat... Can I have a word please Sis... it's a toughy however the conversation starts.
Perhaps agree with DH that when she imparts her next bit of SIL genius, that you will say,
Oh, that's not nice,
or
What do you mean by that?
or
oh excuse me SIL, if you are visiting us in our homes, I'd appreciate a lack of off colour comments and a little more respect.
You HAVE to stand up for yourself woman to woman somehow, she's not like this around DH then? only the people she feels she can do it to?
All DH has to do then is to say SIL, you are being rude, or it sounded off to me too, or if my DW says you have offended her, then you need to listen and apologise.
Easier all round, and it shows you have backbone, and for her not to F$%k with you again.