Ive had a friends who lied all the time too,, though not to that extent but it may of very well gotten there eventually. i tried to talk to them to show that i wasnt believing it,, an they still kept at it. but ive learned that talking to them about it just doesnt work. it makes them more determined to convince you that theyre telling the truth. at least thats the experiences ive had.

it might best to say something to the husband an kids if you decide to say anything to anyone about it. if you tell her she may just open her drama spout even more an act all hurt an shit.

i feel bad for you an the husband an kids though. it is a very hurtful/sad/tiring an annoying situation to go through when people are like that.
best to luck to you an the family