Some people, alas, only learn to respect boundaries after they are strictly enforced. IMHO follow your husband's lead, his ideas are right. Don't let her cake be served, her guests stay or any interference from her happen at all. Only call her back when she leaves a message, that way she will learn to use her manners and leave one the first time.
No, people like this don't take the hint. They need a firm hand and to have matters. spelled. out.
You can be assertive and firm and retrain people without being rude. Really. And it's a kindness to them and to yourself to do so, it will greatly improve your relationship.