I would do like you say and not associate with her anymore. Some people just don't know how to stay out of trouble, and she sounds like a text book example of that kind of person.

Is she still living with your friend? If so, getting her out of your life might not be easy, but you really need to do it because she will eventually drag you into her troubles - especially if you have a temper and can't take her BS very well.

Forget revenge, doesn't accomplish anything and you really won't feel better afterwards. Just work on getting her out of your life. Don't take her places, don't encourage her, if she comes over try and get rid of her as quickly as possible.

She obviously needs help but it doesn't really sound like she's ready to admit that yet.