Dealing with a school Bully?

I am at a bit of a loss and thought I would ask for other people's opinions.

My 8th grade daughter is having problems with another student at school. I have coached this girl in sports before - outside of school - and had multiple discipline problems with her. Her parents refused to see the issues, and in the end the girl left the activity because I refused to create a special list of rules for her. My issues with this girl and her parents was almost three years ago.

Now my daughter and this child are in many classes together at school and now on the same sports team at school. This girl has taken to calling my daughter a "b*****", telling her teammates that I am gay, stupid, a child abuser - and the list goes on. She has also gone as far as saying she wished that another member of the team I coach had died when there was injury.

I have called the athletic director just to talk to him about this situation - as I feel my daughter should be able to participate in school sports without being accosted by this child on a daily basis. His feeling is that as long as she is not physically hurting my daughter there is nothing he can do.

My daughter is considering quitting the team because she is fed up with the constant harassment by this child. She is afraid that if she goes to the coach or teachers that she will be singled out, and the harassment will get worse. She has basically told the girl that her issue is with me - not her, and she needs to let it go. She's not a confrontational child. She is a straight A student, who excels at the sport she went out for (which I think is a huge threat to the other girl) and she just wants to be able to go to school and practice and not be afraid.

I don't want to start throwing "legal action" around or threatening the school, but there has to be a remedy to this situation rather than waiting for this vengeful child to hit my daughter. If this was any other situation I would go to the other child's parents - but I already know how they react to anyone going against their precious little "angel". The child is wholely disrespectful to them, and they refuse to even consider that her behavior is out of line on anything.

I just want my child to be able to go to school without fear - anyone have experience with this, or can you offer any possible solutions? I didn't raise my children to be hateful or to strike out at others, which unfortunately has made my daughter a sitting duck for a vile bully.