If it were me, I would limit your contact with her as much as possible. Why invite her to treat your spouse and son poorly? I know it's easier said than done, but you can't always control how others act. You can only control your response.

My dad is a somewhat toxic person to be around. He is getting better, but a lot of that has to do with me limiting my interaction with him. My sister's kids are his favorite grandkids and I've learned to accept it. I live far enough away that we don't deal with it often. And when he's here, I've cut him off a few times when he was ugly or I've called him out on it there. I got tired of sucking it up and letting him do it.

I find it extremely sad when a parent plays favorites and continues to do so with grandchildren. That is wrong. If it's been brought up and her behavior hasn't changed, find different ways to deal with her. And that may mean cutting her out of your life. It's like the mean kid throwing sand in the sandbox. If the kid doesn't get kicked out, you can keep getting sand in the eye or you can take your toys and leave.