You are right that being unable to forgive is harming you rather than her. I myself would not call this bearing a grudge, as this woman has done a lot of harm and far too much time went by before anyone realised why she was behaving as she was.
Try to focus on the fact that your ex DIL is ill, and from what I know of her condition (which is admittedly not much) she cannot to a very great extent either control her behaviour or behave more in accordance with society's norms and accepted "normal" behaviour.
Ask yourself if you would find it hard to forgive her if a terminal cancer, or Alzheimer's was causing her manipulative and disruptive and harmful behaviour?
My guess is you would find it easier because we have all been brought up to regard mental illness as something that can't be talked openly of, and many of us have a sneaking feeling that a person "ought" to be able to control the darker side of their personality. This poor woman cannot do so, so she is to be pitied, not forgiven.
Forgivness is needed when someone intentionally and in the full knowledge of the fact that they were acting wrongly hurt us, or when they inadvertently hurt us, but are capable of realising that they did wrong.
This is no more the case here, than it would be if a blind person walked into you, knocking you off your feet. We who can see are obliged to move out of the way of the blind, or tell them that we are in front of them with no possiblity of moving out of their path.
Try to concentrate on the part of the family you do still see and continue repairing the damage you have all suffered. I think you can do this best if you all can realise that your former DIL is the victim of a serious illness that she has not caused herself in any way.