I smile and nod while I imagine how I'd like to kill her.
Yep, this! I love that your kids call her up on it!

It's easier to keep the peace, and my DH is a wuss so he would never stand up to her, I just put her in her place when necessary but do it diplomatically (well as much as possible)

I would move hundreds of kms away, but then we'd be stuck with them for weeks when they come to visit, I find it easier to keep them at arms length when they are only 10 mins away. Fortunately we only really see them every 2-3 weeks. Since we've had kids they do my head in. Socialising with them is just plain boring. Currently I am breastfeeding which they seem very uncomfortable around, as DD is constantly on the boob, they leave her and I alone which is great. I have no respect for their parenting or grandparenting skills. My DH has a terrible diet (legacy of his mother) and massive self esteem issues, but is quite spoilt. It appears that showing affection was in short supply when he was growing up but he was indulged as a child and adult with 'things'. They let DS play up when they are around, I am always trying to keep him in check as they are lazy parenters and just let kids do whatever they want without boundries or common sense with regard to safety, and our toyroom is trashed more after Nanna plays with DS than when he plays with another 3yo
They have looked after him once for a few hours in our home, and I pre-prepared all the food. He was a monster for a few days after, we've never let them look after him again!