My sister-in-law has been badmouthing me prior to this and I have been giving in to her previously. She even created a scene on my wedding day but I choose to ignore. Now, she even want to interfere my way parenting and even asked me to go for courses. She even condemn my family in front of my husband and expect my mum to talk to her first. I had spoken to my husband on this and he choose to side his sister.
ok.. so, she is the problem child. seems like she can't breath w/o finding fault w u. your hub, instead of getting involved, choose to watch a show and stay bias.
first, go for the course. When you will have HIGHER parenting skill than her, you will speak louder with theory to back you up.
2nd, ask hubby to settle kids' issue and you withdraw TOTALLY. no comment nothing. stay away, far away (literally). jus inform hub on the issue and let him deal w her. if he chooses to take her sides, be it. coz one fine day, either he realised he is always getting the bad end of the stick or your kid will tell the dad off for being unfair.
whenever you hear anyone condemning your parents, leave the space if you can ta-han.
if can't ta-han and it's an accusation, call all the parties in IMMEDIATELY to verify her claim with your hub as a witness. YES, I mean no matter whr u are what you are doing, the very moment u hear it, pause what you are doing and seek verification. coz, if it's a BIG deal to them then it will be a BIG deal to u to verify ON-THE-SPOT.
Remember, no 1 to 1.. if it involves your parents, call everyone in (either in person or on speaker phone. demand for clarification immediately. stay fair. if really your parents are wrong, then let them know that who has spoken abt their behaviour and how it's not acceptable. if your sis in-law is wrong... then tell her off on the spot and ask for apologies.)
(note: pre-mpt your parents first.)
thereafter, see if she still have BALLS to start this again.
lastly, regarding nasty remarks she made. when she start talking nasty abt u or anyone (parents) in-front of you, jot it down right in front of her. input date, time and plc. by jotting down, you unknowingly 3rd-partied yourself and at least you can stay rational and not emotional. with this record, everyone will see the growing list and it may be useful down the road.