My MIL is very similar to her family. I've gotten to a point where I really don't care what she does/thinks of me... but it really hurts to see what she does to her son. Skip my vent and go to the end for how we deal with her!
She's had a good life; she married for money, hasn't worked since she was about 20, and has been given lots of things (like a 4 bedroom house!) by my DP. Yet, all she can do is tell everyone else how terrible he is as a son. DP's 3 brothers get told absolute bull*&^% about him, and all his other relatives similar. (She does this for all of her children, but DP gets it the worst, even though he is the one who looks after her the most).
She has been divorced for 20 years, and has never had another partner, and after several years, I've finally realised that she actually doesn't have friends, just people who don't want to stand up to her and tell her to go away (i couldn't figure out how some of her nice friends kept the friendship - i finally asked and discovered they just didn't want the confrontation and the MIL keeps calling/turning up).
Anyway, I think what's happening is that because she never has anyone say how 'great' she is (imagine not having a partner tell you they love you, and not having close friends who boost your ego just by enjoying spending time with you), what she does is makes up stuff so she can tell people, and because it sounds like her life is hard, they feel sorry for her and tell her how well she's coping.... and thus she gets her confidence boost; she just can't handle anyone else being 'more' than she is.... so she makes sure she has more problems than anyonen else (by fibbing), and thus noone else can 'beat' her. She's also inherently insecure, so has to always win arguments (will say 'god said so' and start chanting 'devil's be out' if she can't win); will deny she's said something if it goes against her five minutes later, etc, etc.
Solution? I actually think she might be getting dementia, but in the interim, whenever we see her, we basically take no notice of what she says, but agree with everything and give her lots of compliments, even if they're not true. It might be hard to do, but when I was pregnant, I realised that i was less worked up over just letting it wash over us than taking it to heart. As for the family, we know that they know she makes stuff up; we just don't understand why they believe it about us (DP in particular)... but reckon (sadly) that it's not possible to 'fight' her by trying to fix her fibs; she just lies to them again. If they ask us, we tell them the truth, if they don't ask, we have to just accept that maybe they aren't the best family you could ask for, but they're still family.
If your mum is anything like my MIL, she only gets 'against' one family member at a time (i think it reflects badly on her if she's seen to be fighting more than one person). Perhaps if you're included back in the circle again at some point you could have a discussion with the rest of your family and explain that next time you don't want to fight, and perhaps they could consider that there is another point of view than just your mother's.
Best of luck.