I spoke with my mom again today. I am really making an effort here to focus on the current situation and not bring up a lot of sludge from the past, because a conversation with my mom can easily morph into a two-hour tearful session of "I didn't do enough/the right thing" etc and me having to assure her I'm not permanently damaged as a result. My mom is VERY prone to guilt and I have to reassure her a lot that despite having made mistakes (what parent doesn't?) I turned out well-adjusted and relatively normal.
I told her that I am not interested in making my birthday a neighborhood event, and I would really just prefer to have in-town family, my DH, and my best friend and her husband there. I want to make this about what would be a fun birthday for me (since she asked!) and not about who I don't want to see there. This approach worked and my mom asked if she could plan a "surprise" based on a smaller guest list/tamer party, and I said okay.
I truly believe my mom understands the fact that I don't want to socialize with ML, she just doesn't get WHY. In her mind, the years that have gone by with no repeat mean behavior should far outweigh one mean action. That's fine, since she has conceded that we can each make our own choices about who to socialize with.
To clarify a few points, I never discussed it with my friend (ML's daughter, let's call her Amy) but it did impact our friendship. Amy and I were friends with a larger group of six girls in our neighborhood all within 2 years of each other. We did everything together, had a club complete with clubhouse, rituals, etc. Very tight. I was so uncomfortable with ML's treatment that I stopped going to Amy's house for anything - group hang-out, dinners, sleepovers, 1:1 friendship time, anything. I never made a big deal out of it, I just opted out.
Amy was still welcome at our house and was there as often as the other girls. I want to think that my mother very much understood this because she never made an issue of me not being at Amy's house. There was no time that I ever told Amy, "Your mom was mean to me," or anything like that - but I think she got it. So did LeeAnn, another girl in our group - it was her house that Amy and I went to as a the second choice, her parents that took me seriously, let me call the police, gave me clothes. (LeeAnn's father is also the pastor who married DH and I, incidentally!)
I feel a little inclined to defend my mom here simply because she is my mom, but I understand how difficult it is to justify her actions. Like I said, I wish she had validated my feelings a little more vocally but I'm glad that she was able to respect my choice regarding the party.