Please listen to your husband. He’s giving you good advice. Even better, he has stood up for you and given you ongoing support. Like his father before him, he’s acting as a buffer between you and his impossible mother.
This difficult woman isn’t about to change, no matter what you say or do. She has been this way forever. She sees no reason to put in the effort to be more agreeable. She doesn’t care about the relationship as much as you do. Let it go.
The best thing to do in such a situation is to take the high road and do what makes you feel best about yourself. That probably means occasionally going along when there’s a family event, cooking dinner for her now and then, and including her in holidays. Just because someone is mean doesn’t mean that it’s okay to answer in kind. Instead, you can come up with a few stock phrases when she is critical or offensive. “I’ll think about it.” “Thank you for the input.” “I know what you mean.” Such statements don’t commit you to anything but keep the social wheels moving.
Explain to the kids that you put up with her because she is old and she is family. Let them know they should be polite, as you are, but that they don’t have to take her rudeness personally or seriously. She’s a sad, sad person. When she leaves, you can all breathe a sigh of relief and be happy that you don’t see the world as she does.
I wish you well.