It looks like your HP is giving you an early gift for Thanksgiving.
I'm not sure a boundary is telling her she lives in a fantasy world. I'd state what I'm comfortable with and leave it at that. The rest really is hers. It might not work for everyone, but when I hear my mother taking the conversation in a way she wants it to go for her own ends, I ask her a question completely unrelated to what we were talking about.
Sounds to me you've been handling your side of it pretty well up until now regarding her husband.
I know what you mean about taking the "easy" way out by her punishing you. I would be tempted myself. In my case if I didn't take the bull by the horns and just state my wants, I'd have someone with a suitcase on my front steps, "forgiving" me.