How do I deal with my evil mother in law?

It goes way beyond normal mother/daughter in law problems. This woman has lied and even stolen from myself and my husband. She's on a lot of medication for a string of different problems. Everyone who knows her agrees she is completely dramatic and over the top about everything, a compulsive liar, etc. She is very overbearing in our lives... as soon as I think we've gotten away and can keep little to no contact with her she worms her way back into our lives. It's not just me--my husband doesn't even like her, and this is his mom! She makes up lies about me-and sometimes even my husband-and tells everyone in his family and mutual friends.. I am constantly defending myself/my family because even a short phone conversation turns into a huge emotional ordeal. I am just drained and sick of it, hate is a strong word but... she acts nice to get my husband to do something for her and then we somehow get trapped again. It's always the same crap, but it gets worse every time--we just got stationed an hour away from her, and oh boy. I just want her out of our lives. She brings nothing to the table, and I truly feel like my daughter would be better off without her, as all she wants to do is suck what she can out of anyone who will let her. A mother should not treat her son this way... I can understand the typical mother in law issue but this goes way beyond disrespect as her son's wife and even myself as a human being. I can't deal with her with grace and tact as I wish I could; she knows what gets under my skin and I usually just end up hanging up or leaving. What do I do? The few people I've talked to about it tell me cutting her out of our life is not an option--she's family, and I have to respect that. But why should I, when she doesn't respect myself or her own son?