Just keep doing what you're doing. It's your home, not her home, and you have the right to raise the kids however you think is best for them and your family. No matter what she says or does, your husband's ex has no say on what goes on in your home. Unfortunately, you talking to her will probably not change her actions in any way. She probably feels threatened by you and your husband because she's worried that the kids will love your family more than hers. She probably feels the only way she can "win" the childrens' love is if she constantly out-buys you. I know this situation all too well, because my husband's ex-wife is exactly the same way.
My husband has full custody of his two children, so I'm their full-time step-mom, and it drives me crazy when I see my husband's ex spend hundreds and thousands of dollars her kids, especially when all the goods come here into our home and I suddenly become responsible for them. Like your situation, my husband's ex-wife has horrible financial problems, but she still charges credit cards recklessly for the kids and refuses to pay the important bills (like medical expenses and marital debts), which often worries and upsets me.
The only solution I see at the current time is to counteract the ex-wife's bad spending habits by being more money-wise and responsible yourself. Be a good example to your step-kids and they'll probably pick up on it when they're older. Luckily, my husband is the most financially responsible person I have ever met, so I know that his good influence is constantly over his kids. I'm hoping that they'll see his good habits and will learn from it over time.
In the meantime, you have the right to decide what is permitted and not permitted in your home. I ususally have the kids earn the presents their mother gives them in various ways, or sometimes I'll hide things until later times. Some gifts we've shared with their cousins who don't get very many toys, and there have been times when my husband and I have given toys back to their mother when we felt they were too inappropriate for our home (example: a 4 foot rabbit for Easter). Overall, use your best judgement and do what's best for the kids. Sometimes tough love is the best love.