I'm not much help, but I am in a similar position with a friend, who also intervenes before I've had the chance. Her intentions aside, it is rude and dominating to parent someone else's children before they've even had a chance themselves. My "friend" tells my DS that he can't have any more biscuits, or to "get himself dressed" (even when I'm standing right there offering to help him) and I think she shows bias against my DS when her DS is arguing with him (she doesn't let the kids work out their own battles either).

My answer, unfortunately, is to distance myself from her. I find interaction with her very stressful. So I'm sorry, I'm not much help, but I know how it feels.