Maybe just say something like:

Distance & life has made it impossible for me to be the kind of friend you expect out if me. Maybe now is a good time for us to go in our own directions. I enjoyed the friendship we shared but life paths take different directions & that is where it is today.

I would honestly just write off what she said to her mental illness. My mom wasn't mentally ill but had her issues & I was always writing off what she said to "just mom" & go on with my life. I now understand just how dysfunctional she was even without a mental illness...sometimes it's just not worth holding onto things people say.