Yikes! What a situation!
Maybe you could try handling her the same way you might handle if your child was interrupting. (I'll use Jane as your neighbor's name and Mary as your daughter's name.) If you are in the middle of disciplining your daughter, and she interrupts, in your nicest tone you might say, "Excuse me, please, Jane, please don't interrupt me while I am talking with Mary. I will speak to you when I am finished handling this situation with my daughter." Then, without undermining her authority in front of her children, you can speak calmly and quietly to her about your concerns. I don't think getting indignant with her will help; she will become defensive, run away and send her husband out. Like you would with a child, explain to her your feelings, what you want and the resulting consequence. i.e. "I am uncomfortable with the way you sometimes speak to my child. I would prefer that you not discipline her at all, since I feel that our conflicting methods undermine my authority as her parent. If you continue to disrespect me by speaking to her in a way that I feel is not appropriate, then I will be forced to stop interacting with you."
I was once told that there is no way or someone to argue with your feelings. They don't have to be rational or explainable; they are what they are. I know this sounds simple, but you would be amazed at how well it can work. It allows you to assert your authority as a parent, place the responsibility on your neighbor without blaming, communicate your feelings and expectations and the pending consequences. I know that, at first, it might feel great to just "let her have it", but it isn't the right way to treat a person. You don't like the way she is speaking to your daughter, so why would you speak to your neighbor that way? It is still important to set a positive example for your child, whether you think she hears you or not. You should know, though, that if you threaten this, then the only way it will work is to follow through. You might have to play in your yard for a while, if she doesn't change her ways, until she gets the point. If your neighbors feel the same way, then I am sure they will join you in your yard and you won't have to feel left out. I think eventually she will get the point, and if she doesn't, then I wouldn't want to be around her anyway. Good luck!