Sounds like you've encountered a common species called anu5 orifice. Personally, I've never bought into the 'better person' ideal. I mean, what defines someone as a better person is subjective to interpretation and that, in and of itself, varies from person to person. You're in a situation where if you do stoop low that there will be collateral damage to the people you care for, so, in this case, the only thing I can suggest is if she says something stupid and offensive like that, don't respond. Seriously. No verbalization, body language, eye movement, etc. It's gonna be hard as hell but trust me, it will itch at her to no end AND you didn't make a fool of yourself in doing so, so that's good. It will almost certainly cause her to up her game and become more aggressive but there will come a time when she does that in front of other people, revealing herself as out-of-line in front of them. Chances are, someone will scold her for it. It's no guarantee but I've seen it work flawlessly on several occasions. People who do stuff like that are narcissists and sounds like she has a few histrionic traits as well. The narcissist has the mindset that they, themselves, take priority over others, even if they are actively helping others. When they are negative and critical and you respond, you are feeding them exactly what they want. I'm not saying completely ignore her. Instead, try only responding to the positive or encouraging things she says. That may lighten things up a little between the two of you. Or, if you're brave enough, just sit down and have a one on one talk with her and express to her how she makes you feel, but you'll have to word it in such a way that it doesn't sound like an attack. Trying not to use the word 'you' during the conversation is tricky but makes the confrontation seem less threatening to her, thus, at least limiting aggressive retaliation. That is tricky. If you decide against it, that's fine, too. Either way, she knows that she matters in your life but only when she's not being a b1tch.

Remember, the anger you feel now is exactly what she wants -and justified on your part but it still means that she's controlling you. I know, easier said than done. It's going to take a lot of practice and a lot of forced patience. And I understand how hard it is to try to suppress blood-thirsty rage when you have the urge out of frustration to just finally put someone in their place but, trust me, it doesn't work. It just makes things worse. It's really good that you consulted someone before acting. That is so good, you just don't even know. It means that you think before you act, which is a really good trait but don't let it paralyze you.