Good husband but worst mother-in-law....what to do ?????

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I got married in june 2004. Before marriage, i had some dreams. I thought i will create some good and longlasting relations with in-laws. My father always taught me to develop good relations with in-laws. Initially i tried for the same but it never happened. Before my marriage my mother-in-law pretended as a good woman in this whole world but after marriage she came in her real role. She never loved my husband also but he didn't know this or may be he has this feeling but doesn't want to show me. when my husband was small she used to beat him with stick untill it breaks. Once she used one very bad word for my husband. She is fond of money & when my husband started earning money, she started treating him well.She spolied all her in-laws relationship also. My father-in-law also had broken the relationship with his real sister. It seems she is the boss and controlling everyone and wants to control her daughter-in-law. I never thought of it. After marriage she used to give me mental tensions by putting my father & mother's name in between in front of one of her friend over phone. That time I thought must be my mistake only. But after some time slowly-slowly she did some mischiefs with me,which i couldn't tolerate. I started hating her. Every time she used to fight or argue with me purposely. It seems she is interested in fighting and she feels happy in that. She creates such a bad environment every where. I thought she is doing with me only but one day i got it that the same thing she is doing with my husband's elder brother's wife also. In my husband's family nobody says anything to her since beginning and i think bcoz of this reason she is sitting on our head. She used to insult me whenever she wants. One day when i got sick she got angry on me. In that situation also she used to give me lot of work. I did but never utter any word from my mouth. That time my husband was not there. She doesn't stay with me but still gave so much of trouble. One day me and my husband went to my mothers place in that also she got angry bcoz she doesn't want her son to go to his in-laws place. She wanted to control me. I struggled a lot for 3 years and at last i decided to say something against this. One day she phoned me and started shouting on me and as usual put my mothers name in between, i couldn't tolerate this and now this time i started shouted on her. That day i gave her a nice dose and clearly told her not to put my parents name in between. After that she was shocked as 1st time after marriage i spoke for me and it happened 6 months back. But i don't want to talk with her and don't want to meet her. My husband understands my problem and supported me a lot but he is telling me don't break the relations like this. He wants me Go to in-laws place and come back with him. I m confused whether to go or not bcoz i hate that lady who gave me trouble and i can't forget all the things happened with me. I can't forgive her in my whole life. What to do? I think i should go and come back with my husband. What you people think of it.....If again she does the same, then i should say something in front of everyone. Just simply can i give her police-threat?