I would write her a letter. Nothing aggressive but maybe make her feel like a piece of poop for meddling in your affairs. Tell her you are extremely saddened by the fact that she is so pathetic that she has to involove and try to sabotage someone else's home life. Tell her you are extremely sorry for whatever terrible wrong doing has been done to her that makes her feel she needs to lie. Tell her that you have refrianed from mentioning what some if the neighbors have said about HER, you have always thought she was a "real nice lady" and you dont beleive that she is a poor lonely, meddlesome, crazy old lady as most say.
Then offer the old witch some cookies with rat poison, haha!
I had a neighbor complain that Rory was barking non stop day and night......when Rory wasnt even home. She hated Rory because she was a pit bull....that was after she had met her, petted her and then inquired about her breed. After we moved (for other reasons) another neighbor said the new tenants had the meanest barking poodle. It barked all day, hah aha haha ha!!!!