Conflict with neighbor...?

Not to care. She is acting like she is in middle school and doesn't control her children. Not your fault. You try to prevent your children from harm from hers. Totally right move. She freaks out about the fact someone is telling her she is a bad parent (which she is). Again not your fault. Don't worry about it, let her be mad at you. Unless she is spreading gossip or anything don't worry about. Be polite to her, don't piss her off anymore, but mostly don't feel bad about doing the right thing.