A.,
I hear you. My mother-in-law is not quite that bad, but close. My children are her only grandchildren. Do you think she could call on their birthdays and wish them a happy birthday? Nope. She didn't even remember my son's birthday. Hello it is called a calendar, right? The birthday cards she gets for them are not for grandson/granddaughter. Guess she would have to spend another buck or two.
So, here is my suggestion. Your life is you, your husband and your daughter. The woman obviously has a very big problem and she is the adult. She has to deal with it. Now I am sure it is not hard for you not to be around her, but does your husband see how she acts? If he does, then maybe you two can agree to not see her, don't call and when she asks what the problem is tell her. I understand it is easier said than done, but deep down I believe she wants someone to stand up to her. She will probably respect you for it. It is not easy. No one likes confrontation but it will only get worse.
I wish you courage and the best of luck.
M.