Dealing with Mother-in-Law

My MIL is horrible, and I'm sure some of you can relate. She is always throwing daggers and comparing my DD (her only grandchild) to her grandnieces and nephews - and never positively. My questions are more bizarre, however. Last time we visited, she was next to my DD outside in the grass and her little dog was rolling in something a few feet away. I went over to see what the dog was rolling in and it was a pile of dead mice. I told my MIL and she said her cats were doing their job and called the dog over to her and my DD. Then she grabbed my DD's hand and started rubbing it all over the side where the dog just rolled in dead mice saying, "here, pet the dog." I was shocked and exclaimed "the dog was just rolling in dead mice!" but my MIL didn't stop, so I called the dog over and she went and rolled again! After a minute or so, my MIL called her over again and did the same thing, rubbing my daughters hand roughly all over the side where the dog had just rolled! So I just went over and picked my DD up and took her inside and washed her hands while my MIL stared at us. I am so disturbed by this that I'm afraid to leave my DD along with her. What in the world would you do/say if your MIL did this? I asked my DH about it and he just said his mom was crazy.

The second situation I'd really like advice about re: my MIL happened yesterday. She called and halfway thru the conversation she told me that my DH's sister can't wait to teach my daughter swear words. His sister is 28 y/o. What do I do?

To give you a little more background on my MIL: she admittedly tried to ruin our wedding, tells horrible lies about me to her friends and family and turns every celebration into a huge drama fest about how she was mistreated by my husband or me somehow. My DH's father (her DH) died suddenly last winter and everyone is grieving.

The last situation I'd really like advice/support/your stories on happened yesterday when she called. She was angry about our DD's first birthday party because we didn't include my DH's sisters on the Evite. This is true - we didn't include them because they are going to school and living out of state - but we had already told them about the party and said we didn't want them to feel obligated to fly here for the birthday party and they totally understood. Anyway, I explained this and my MIL went into a tirade about how we mistreat her and ignore her grieving. Then she said that she hoped that someone close to us like my DD would die because then we would feel guilty for all the pain my DH and I have put her through. When she said that to me I was so livid and told her it was a horrible thing to say and did she really think that seeing us lose our child would make her feel better? Not to mention that my DH DID lose someone close to him - his father.

Sorry for the long request, I'm just really hoping for some support or advice. The mice incident still makes me sick to my stomach and I can barely think about the awful things she said yesterday.