Sam, I have not been ignoring your plight but have been giving it lots of thought. What I do these days is wait until I'm absolutely certain that someone really wants my advice. I find that often when I'm asked my opinion (by my DIL or a friend) that mostly people only want me to say what they want to hear or want to do anyway. If you were asking me what I would do in the same situation I will tell you what I would do. This may not be what you want to do though.
I would ring your neighbour & ask to visit her when there is no-one else about, including children. I would think carefully about what you want to happen (or not happen any more) & tell her truthfully how you feel. No dropping hints, just the truth.
I think it sounds like you are under a lot of stress & she may be part of the problem. It may also be that it sometimes is easier to direct your feelings towards an outside source, rather than looking elsewhere.
I am no psychologist but have benefited from visiting one this year for the first time. It sounds like you have lots of pressures & stresses. Having young children & a husband who is away a lot working sounds stressful in itself.
I guess what I am saying is try to work out if it is really her driving you crazy at the moment or a combination of different things. If you think it's her have a word with her honestly. If not, have a chat anyway & ask for some space & less pressure.
Whatever you do look after yourself. I actually care what happens in people's lives. I did not have much outside support when my children were young & I think it's one of the toughest jobs in the world, being a parent. Give yourself some slack & take some time for the 2 of you as well as your kids.
I think being honest is the most important thing. If you talk to your neighbour, tell her the truth about how you are feeling & she doesn't like it- TOUGH!
You can disregard everything I say but I have found saying how you feel (calmly if you can) has been the best way for me & that's all any of us can ever do. I can't tell you what you should do. Only you can make that decision.
If you want to pm me please do. I'll help if I can. xo Cate