How do I handle this situation with dignity?

I have never really felt close to my husband's sister. She and I are like night and day. I am a homely individual who dedicates myself to my kids and husband. I try to conduct myself and my actions in an appropriate manner for a middle age mother of 2 and a wife. I do not hang out in local pubs or bars or ship my children to babysitters rather than spending that time doing something constructive as a family. My husbands sister leaves her child with my in-laws at least 4 to 5 days and nights a week. When she does get a day off she again leaves him there and goes out and gets what she calls her drunk on. When she has him at home she puts him to bed then invites friends over and drinks the night away while he is in bed asleep. This is her business and is not my concern. What became my concern is when her son came to me and said she picked up a man and took him to a hotel. She went into the bathroom and locked the door. She told her son to watch television while she had sex in a hotel bathroom. I questioned her about it and told her it was horrible and she is a bad mother if she was doing things like that.

We haven't spoke since. Recently my father passed away and my kids lost their pap pap. They were at my in-laws while I was taking care of things and her son told them I was nasty, selfish, and come from a nasty, disgusting family. This upset them as they loved my dad and my other family members who are good people with very good paying jobs such as school superintendents, vice president of the department of taxation, and financial advisor for the Ford Motor Company. She is a piece of work who sleeps around with many men, takes pictures of men licking her boobs and post them on social sites, and who is a leach and lives off of my in-laws. They raise her son for her. Should I say something to her or just let this go. I have looked the other way many times and people constantly come up to me and say she talks terrible about me. She even did it at my dad's funeral. She sat in front of my dad's casket and talked terrible about me to my cousin who later told me what she said. Man this woman is something else!