Uptight friend- always very harsh and strict?

I met a woman about a year ago, and we became friends. (She posted an ad on a local classified site saying her and her husband and baby were new to the area, I responded, we got along well).

The problem is, the past few months, she has gone from being very quiet, easy going and relaxed to very uptight, harsh and judgemental.

She used to bring her daughter over to our house (she's like 16 months now). Now she suddenly won't- she says our dog makes her nervous (this is a new thing the past 3 months or so).

She used to always tell me to stop by anytime- then when I did one day, she flipped out- said I should have let her know, she wasn't dressed for company, and that I was really stopping by at a time when she didn't appreciate company (between 8am-10am, then between 12-2pm, then anytime after 4 pm aren't "acceptable" times to stop by).

When my husband got a new job, and I told her about it, she told me she didn't feel that he should be travelling for work, as he had a family he needed to think about before himself. Also when she asked about his salary and I tried explaining how his pay worked, she told me she had trouble believing me he would "make so much and so randomly". And that she couldn't make sense of it, so she didn't believe me.

When she dropped off a bag of kids clothes for my daughter, a few things weren't needed. When I dropped off some clothes at her place for HER daughter, a few of the pieces she had given me were in there. She FLEW off the handle and told me if I didn't appreciate the items, she wouldn't give them to me.

We are having a yard sale together this weekend, and when she found out I invited a few other families on the street to join in (in their yards), she said it was "tacky and inappropriate" of me to do so- that she felt like her yard sale prep was going to be taken advantage of.

When we were shopping one day, she picked up an item that was under a sign "proudly made in the USA". The tag in the item said "made in Nepal" and she asked to see the manager, complained to him she was being ripped off in her rights to seek out country made items and she wanted it to end in their store IMMEDIATELY.

When I saw her walking downtown when I was in a shop, I ran out and said hello, and she said "Oh, hi. I see you're sitting in the coffee shop again... how nice for you." She won't go into that coffee shop because they don't regularly have almond milk for her coffee instead of cream or real milk. She says its an infringement of her comfort and right to go non-dairy.

She has become this idealistic person who imagines everyone and everything in her life should be perfect and socially perfect. She admits she has a hard time making friends, and keeping them. I think after this weekend I am going to cut it off with her, I am done being criticized and made to feel like someone she thinks is "tacky". I am a pretty laid back person, and I don't stress about much. It stresses me out when I think about what she is going to think or say about what I do/say.

My question is- how do you distance yourself from someone without making things really estranged? We live in a small town, and our husbands know each other quite well. I'm not sure if I should just stop contacting her, and not respond to her emails, messages? I haven't EVER had to "break up" with a friend- most people I am friends with I have been for YEARS, so I don't know how to just cut out a "friend" from my life. Help!