Aggressive grandparent

I'd like some opinions. When I was 14 I turned my parents in for child abuse, which was warranted. I had an alcoholic father who beat me and my younger sisters and a mother with a horrible temper who did the same when she was frustrated. Hit first--scream later was her motto. Now, 14 years later, I have two children of my own. Today, in my presence, because my cranky, sleepy son told me "no," she slapped him. Although I wanted to scream, I calmly let her know I felt she was wrong to do so and I told her I never wanted her to EVER strike one of my children again, but she insists she was in the right and will not hesitate to strike either of my children, whether I like it or not. She says she does not care whether or not she has a relationship at all with her grandchildren (these are her only two so far). My other child is a 17mo girl, and this woman says she would not hesitate to strike her, either, and would also not hesitate to slap me if I "sassed" her. My husband is quite angry and wants us to not allow her to see our children. How would you handle this?