You're not overreacting. This woman has some serious problems.
I was unsure of how to approach this due to my background being extremely different, and I have not been around people like this before.
Since we are speaking of a member of your husband's family, you should ask him how he wants you to handle the contacts. As others have said, your relationship with your husband comes first. If she calls you to ask him something, stay out of it.
As Ian mentioned we use people names rather than handles around here. I have to caution you. Don't use your real name (you can make up a name) because you have revealed far too many details about another person. If you hadn't given a relationship it wouldn't be a big deal, but you did so it would be easy for anyone who knows you to know exactly who you are talking about.