Rude FMIL and the new baby?

Me and my FH have been living together for a year and at first everything was great. His mother was going through a divorce and told me all about it every chance she got. I sat and listened, realizing she had a son and probably no one to express her feelings to. But push came to shove she was talking about me more than she was talking to me. She would tell me that I did such a good job cleaning up, but would tell my FH I messed up the hard wood floor; I put appliques on my sons wall, she told me they were cute but told my FH I was ruining the walls. First off my FH bought a house and moved his mom in and being the sweetheart he is he let her have the master bedroom so she would be more secluded and we could have some privacy- which didnt work. So finally it hit the fan that I knew she was talking about me and she cursed me and my FH out his dad called and told her she needed to move out, but she refuses to. She comes in and slams the doors, stomps really hard coming in at 11pm while are trying to get sleep before work, and just bombards in every one of our conflicts, and has went so far to tell him that I am cheating on him and the baby may not be his. My FH no longer deals with her because of how she treats me and has asked her to leave because now more than ever we need the extra room for the baby. I have however stayed out of any arguments with her because my stress level has already gotten too high. My FH feels that because she is so mean to me (she doesn't even speak or say hello) she should have no involvement with our child. I agree with him partially (until she gets herself together)but then its a difficult situation to be in because unfortunately right now we all live together. I don't know exactly how to deal with this. A child is a child, yes I gave birth to them but I dont own them and whether I like it, she is still their grandmother. Opinions?