how to deal with a difficult SIL

An
My husband told me last night that his sister in law is holding onto anger toward me because a year and a half ago she called someone a "retard" at dinner with the entire family and I responded that I found that to be inappropriate (I am a teacher and have a special ed class) and told her about the "spread the word to end the word" campaign put on by the special olympics.
I'm offended that she spoke to my husband about this. It's like she was trying to pit him against me.
Since then she has been very cold to me and even refused to speak to me this past Christmas (I spoke directly to her and she ignored me).
So I guess my question is...how do you all keep the peace with your crazy in laws, sisters specifically. Female relationships can be tricky! I already have 2 sisters, I don't need her drama!