I think you are doing the right thing, but I can't help feeling sorry for GF. I mean, from her perspective she was invited by a family member to family events - and probably told by SIL that "of course, you're welcome! You're my friend!".
Of course, it was not SIL's right to do so, but I mean - she's spending nearly every major holiday for apparently YEARS at your house, and suddenly she is told that she's not welcome (and I'm not sure SIL will be gracious about it). Not your problem, but like I said, I just feel bad for her. How awful to realize after the fact that you were not wanted. Ugh.
How unfair of SIL to put her friend in the middle like that.
I don't feel sorry for her at all. She obviously has her own family so she should be spending holidays with them. From OP's posts, the GF has not made any effort to get to know anyone but the SIL and her DH. If I was going to continuously show up at these events, I would be bringing something, dessert perhaps, and I would socialize with the whole family. They are just using the OP as a meeting place.
WTG Twiggy ! It is not easy to have a spine o' steel with family, but you did it, you did it politely, and now just get ready to enjoy your baby's blessing. I POD the other posters who say to let hubby know what you said so if he gets a call, he is ready.
There are many people who do not spend holidays with families - several posters here included - and instead spend them with friends. In this case the friend had two children, so arguably she wouldn't be alone on holidays; however, do you think that anyone without a family, or who doesn't get along with their family, or lives away from family should spend their holidays alone because it's rude to spend the holidays with someone else's family? I don't, my family didn't, and fortunately my friends and their families do not.
I think that its not the OP's problem where the SIL's friend spends her holidays.
^^Friend isn't spending the actual holiday day with us, just a day during the holiday season (to an outside perspective). Typically the out of staters spend Christmas Day at home and then travel here for the last week of December/first week of Jan time frame. So while it is DH Family Christmas Gathering, it's happening anywhere from Dec. 28- Jan. 9 so Friend may not even be picking up that it's a Holiday Dinner as opposed to big family gathering because people are in town. So I'm assuming that SIL is saying, "hey, we're having dinner at Twiggy's house, why don't you drop by" as opposed to "My family's Christmas Celebration is tomorrow. You should come"
DH is in my corner. He doesn't quite get why it's a big deal to me, but since it's a big deal to me, it's a deal to him. Last time SIL called to ask why I hate her, he let her vent, told her I don't hate her, and basically let her know that he didn't see a problem with what had gone down.
Which is a big change. He used to comfort her, roll his eyes, tell her how much we all love her, and that he was sure I wasn't trying to hurt her feelings, etc. etc. etc. Then when he finally got off the phone, he would ask me why I couldn't just play nice/apologize to keep the peace, even though it wasn't my fault. DH is the peacekeeper in his family.