This is such a long story that I can't possibly do justice to it all so I will try and summarise the pertinent points without leaving out anything significant - no drip-feeding intended but it is still really long, sorry!
Essentially my DM and I are just at the end of the line. I love her deeply and dearly but I can't handle her toxicity any more. She has always been troubled; brought us up alone under great stress in the 80s, had huge fallouts with her family and completely antagonistic relationship with my DF (which I don't blame her for) so life has definitely been hard and she is a very negative person - always someone to blame for perfectly normal life setbacks - she has no emotional resilience and flies off the handle - at the bus driver, librarian, shop assistant etc at the drop of a hat.
We have been having an increasingly tense relationship since I was married almost a decade ago (she told me she didn't believe in marriage when I told her we got engaged). The wedding itself was all sorts of wrong - she insisted that the family with whom she had fallen out were invited, was perfectly lovely to them all night (I was delighted, thought it was all resolved) but little did I know that she was storing up all the slights and insults to add to her enemies book and keep her fuelled with vitriol for years.
I have since had DC and she is just utterly crazy now. Nothing is good or right in the world when it comes to them, or more specifically my eldest. (I am a selfish mother. Why did I have children if I was just going to work? My child is too hot / cold / shouldn't wear pull-ups / be in bunks. I don't feed them properly (beans on toast - completely selfish and lazy), their nanny is a drug dealer (she went to Poland once - no, I don't bloody know either) when did I last wash my outside fence? Etc) but all of this, while tedious, can be coped with.
My line has been crossed recently in two ways - firstly, she has massively taken against my youngest DS (3yo). Apparently he is a bully ('walks over' his older brother) - violent, jealous, aggressive, something is wrong with him, he's not normal, he needs proper discipline. What she means is she wants to hit him (she used to hit me with a belt). I am not sanctioning this one tiny bit and it's driving her wild. For the avoidance of doubt, this is literally based on NOTHING - for instance last week the DC were playing tag in the garden, when the youngest 'tagged' (tapped him on the hand and ran off) the elder (they were laughing and playing happily) she literally grabbed the little one, taking his arm out of his socket and screamed in his face that he was violent, naughty and disgusting. Obviously both children started immediately bawling. My DH was home and she then started screaming at him for being an ineffectual parent, in front of the children. I returned home from work soon afterwards and she then started on me and the fact that she 'sees through' my 3yo, that he's crafty and manipulative (cuddles are his cynical modus operandi apparently).
She has now decided that something is wrong with my DH - the second issue. He is a terrible father; he is grooming the younger one to bully the eldest for sport, because he likes to cause trouble (again, to be clear these are happy, close little boys - the eldest isn't a shrinking violet and the youngest isn't a demon) - why is DH so close to his sons? She finds this sinister, she thinks a child should only ever want their mother when sick/hurt and the fact that the boys will go to him when upset makes her think something is 'odd'. If one of the boys has a bruise (and they are little boys so their shins are pretty much always mottled), she suggests that DH has hurt them. She talks with poison and frequently uses horrible words and phrases like neglect and abuse (using pull-ups at night is abuse). Anyway, I could go on forever and this is already too long.
I love her but this is so damaging. My eldest said to his little brother that Grandma doesn't love him and the 3yo said 'I know [sigh]. I am naughty.' She spat on me in front of my children. She's just out of control and I don't want my children exposed to it any more. However she is alone - my DB has moved away because he can't bear it, she is isolated from all of her family and has no friends any more - we are all she has left. I feel so so selfish and weak - I feel like I should have better daughter - she is clearly bitter and lonely and I sometimes think she starts arguments just to have a conversation. I told her yesterday that she can't see us anymore unless she consents to counselling or family mediation and has just received alternatively outraged and heartbroken texts for 24 hours, with regular phone calls and voicemails full of hatred and sorrow. My DH has received just utter nastiness. I don't know what to do next.