How should we be handling her to make life more bearable without always giving in to her demands and expectations?
As you don't have to be around her all the time, I think you can definitely make things more bearable. What you can't do is turn her into a sane, reasonable adult. So the first way to make life more bearable is to resign yourself to this fact.
Emotionally, she's a small child. She cannot grow up. So, as you would do with a toddler you're fond of, feed her ego the very second you clap eyes on her. Display great joy at the privilege of being in her company, ADMIRE her - a lot - and ask nothing of her (except to show something off, if you're feeling indulgent.) Then move smoothly away. Tip: Never move away to admire someone else! Either have a regrettable duty to fulfil (anything will do, she doesn't care) or provide another admirer to take your place. If you've ever hosted boring parties, you'll be an expert at this 
The trick to getting out of things is to slide away. Don't argue or suggest something that wasn't her idea. If you've got the time/energy and acting skills, though, you can drip-feed your idea to her, in hopes she'll decide it looks better and pretend she thought of it.
When stuck in front of a Monologue About Me, occupy your mind elsewhere while uttering "Oooh!" and "Wow!" and "Tell me more!" You and DH can play secret games; count the number of times she says "I" in sixty seconds, score her for stealth boasts, that sort of thing ...
When subjected to a Narcisstic Rage, be ever so passive. Look as though you're listening, but remember this actually has nothing to do with you - it's All About Her. So don't bother trying to reply to any points, justify anything or try to calm her down. She'll blow over, like a storm. Weirdly, she probably won't even remember that she raged.
Hope this is some help! Do, please, give her DC all the sympathy you can show without pissing her off. I took to saying "Ouch!" whenever one of my Narcs dropped a bomb on her kids. She didn't even notice, but I got a truly heartfelt "Thanks" from DC. Every time. The poor kids don't get much validation.