I think you should continue to be gracious for the sake of your Son and DIL. If you are moving in a year anyway, you will feel better knowing you were kind with someone that is a little off. As infuriating as it is, she is like unruley children being brought into your home, just put some things away while she is "visiting". She is obviously mentally challenged and your DIL will always remember how kind you were to her Mother.
However, that being said, I think maybe packing away your fabrics that you would like to keep is a good idea. If she asks what happened, just say you have started packing some things for the move. When she starts acting "funny" just change the subject and move her to another room.
My MIL always said "There but for the grace of God go I" when she encounterd someone with "problems" of any kind. She was a nurse, so she met up with a lot of them.