I understand what you are saying. I felt the same way when I was with my baby's father... something about our relationship brought out the insecure girl in me. There are two issues I can see as possibilities here:
1. Your jealousy, which needs to be curbed, if you are to be in a healthy and good relationship with your husband. The best way to let go of such unhealthy feelings is to work on yourself, so you are the girl you are jealous of. Meaning, treat yourself well, dress well, and be your sexiest, on a daily basis. Not to compete with anyone else, but to love yourself. When you are confident, that is the sexiest thing in the world to a man.
2. I strongly believe in woman's intuition, too, and if you perceive this woman as a threat, she might be... she sounds a little predatory to me, bumming cigarettes and spending lots of time chatting with your husband. She can probably read your insecurities as well. And if she is going through separation/divorce with her hubby (or at the very least, having problems), she might be looking to your husband for emotional support.
What to do? You can set boundaries with her, like if you see them outside together, go out and sit right in between them. :) I did this once, when I was feeling insecure, just to "stake my claim", which, in retrospect, was very silly. Or you can just trust your husband to know what to do.
Whatever you do, try not to get pegged into that insecure wife label where your husband can use that as leverage and always refute your doubts with, well, you are just too insecure. If your husband says you are hot, and you don't believe him, then that is not his problem, it is yours - give your husband compliments, too, and make sure he feels loved by you. Then give him space, and trust him - because that is part of what marriage is about. It's tough, I know, but you can do it.