How do I break the news

Sedaya • My name is Sedaya and I'm 23. My husband and I have been together since 2009 and got married April 2015. We have a four year old daughter and had our second daughter 4-16-16 :)
So I've had this mom friend for two years now. Her daughter and my daughter are the same age and play together all the time. She even decided to enroll her daughter in the same school as mine for kindergarten even though they live in a different district. She has an 8 month old daughter and I'm going to have another daughter in April so we have children the same age. Well her four year is a terror! She is bossy and rude. At my daughters birthday party in 2014 her daughter opened all the presents and didn't let my daughter open one and she wouldn't listen to anyone and her mom wasn't doing much about it. Anyways every time we have play dates her daughter bosses mine around and does mean things but my daughter is really patient and super sweet and loves to play with her despite her flaws. They do have fun together most of the time. Every time my daughter comes home she reports this to my husband and today was the last straw for him. I met them at the mall and her daughter hit a little boy in the face and all her mom did was say I didn't see her do it but the little boy was crying and pointed her out as the culprit and even my daughter said she saw her hit him. This is typical though because she always makes excuses like oh she is just four or she is bored or I'm too harsh on her. Anyways she kept pushing my daughter today so I finally snapped and yelled at her. We left the play area to go to the food court and I bought my daughter pretzel bites and her daughter knocked them out of my daughter's hands and made her cry. So I left the mall and of course my mom friend apologized and said she would pay for the pretzels. Anyways I told my daughter if you tell daddy he is going to say you can't see her anymore and of course that's exactly what happened. I really love my mom friend. She has been so generous and kind. She gave me enough baby clothes to last a year and always buys my daughter things. She is great to talk to and just a sweet sweet lady so I don't know how to tell her that my daughter is no longer allowed to play with her daughter. I feel so bad about it but she doesn't know how to discipline and my daughter doesn't need to be treated like this constantly. How do I tell her without ruining our friendship? I don't want our daughters to not ever see each other but how will I know if her daughter has changed her mean ways?