WOW!! That's the same crazy stuff my mother told us!! I'm convinced these demonic stories make their rounds and our mothers make them their own!!
I seriously would just cut off any communication with her for now. Block her from your email, facebook anything that will keep her up to date with how you and your children are doing. I guarantee she will come around one day....much more humble.
I learned if I give my mom an audience to preach her beliefs it will never end!! So I made it clear we will not talk religion at all! after a couple months of silence she came around. We of course have very little in common anymore (which is sad) but I know how she is doing and she knows how we are doing. It is what it is.