Sorry you're having such a hard time, it sounds very difficult.
Is there an official arrangement in place for where the DC live, that your DP is the RP and their DM has specific days when they're (meant to be) with her? Does she have a partner?
I'm not sure from your post if mediation was intended to resolve contact issues or what she's been saying about you and DP - though that's obviously unhelpful as well.
Where do the DC want to live? If they're settled with you and DP are they happy going to have contact with her? Maybe some of their extra difficulties/behaviour at the moment are down to feeling rejected by her if she often cancels plans and they feel safe lashing out at you. Which doesn't make it easier for you to hear it!
Can you let your DP do all the liaising with her on contact and keep communication strictly about the DC? There's no reason for you and she to have any contact, especially if she's unpleasant about/to you. Just leave your DP to it and block her number if she's contacting you directly.
It's hard if she's bad mouthing you to the DC but all I think you can do is react as little as possible, ask DP to tackle any outright lies, and keep your replies where necessary to "well, it's a shame DM feels that way but not everyone can be friends", "really? how would she know that? (change subject)", "well, you know there are always two sides to every story and everyone's entitled to their view" or something non-committal. Then go and punch a pillow till you feel better.
If you're hearing about her insults and lies via your DP just tell him nothing good can come of it and you'd rather he didn't tell you. If you weren't in the mediation session he must have told you what she said. So she got to hurt you even though you weren't there. It's better to not have to hear it. You're clearly not a twat so just try and feel sorry for her that she feels the need to be so childish and unpleasant...
All the drama sounds exhausting and you need to protect yourself and your own DC as much as possible. Let your DP handle her, preferably by reducing contact to contact arrangements by email, and try to rise above anything the DCs pass on from her.
I feel for you and hope it gets better over time 