Quite honestly, I'm a bit surprised she lasted this long. In any company I've worked for, saying F-you to a manager would have probably gotten you fired. I think you're definitely right to tell her to keep her head down and do the job. You may have to go broken record on this, every time she brings up perceived slight at work, repeat I'm not discussing this, you need to put your head down etc.
Good luck, it sounds challenging
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"I danced in the morning when the world was begun. I danced in the moon and the stars and the sun". From my favourite hymn.
"If you see the wonder in a fairy tale, you can take the future even if you fail." Abba