I am a lawyer in CT.  I suggest that you pay a lawyer to write a letter to the neighbor explaining that her conduct is unlawful (i.e. slander, negligent infliction of emotional distress, etc.) and will be sued if she does not stop.  Or you can hire a lawyer to sue her for money damages now, beginning with a prejudgment remedy that attempts to put a lien on her home.  I would take immediate action here.