My mother in law is a bag!!! First of all she talks behind my back to her step daughter and then talks behind her sd's back to me....of course we tell everything she says!

Its either about how we handle our kids or about how I handle my house.
It really put me over the edge on Easter weekend when we were all at the in-laws house. Erin, my 4 year old, threw something and wouldn't pick it up....i was using the bathroom at the time and didn't see what had happened. So when i came out of the bathroom I see my mil yelling at my dd and telling her she is going to go in the bedroom for a time out. First! don't discipline my kid, Second! NOT the way I would handle such a minor infraction. Erin was SOOOO upset that she was crying(real tears!) She was sad cuz her grandma YELLED at her!
On the other side of things my sil's daughter just turned 2 and mil would not let up on her about being potty trained! "you smell when youpoop" "ew! did you pee" "you should go on the potty!" not at all in a nice voice either.....its not trying to help kind of comments....its her trying to tell us that we aren't doing things with our children the right way!
What would you do if your mil was always on your kids back and your back and always talking behind backs?????
I am a non confrontational type of person and hate to argue too much........please help tell her to back off! in a nice way.
Thanks Julie