Regardless of the cause, this behavior is menacing. It's unfortunate that she's changed so much, and although you can speculate on the reasons why in an attempt to understand or sympathize with her current impairment, the point is, she's different as a result.
I'd first send her and her husband a nice letter describing her current behaviors and these incidents in a very observatory, matter of fact description...and your concerns, cc the police. Then, I'd document and video as much as I can. You might also need to get your attorney involved.
This is a very serious matter (above and beyond the inconvenience) as she can and most probably will either lash out or accuse you of doing so, and unfortunately, the police tend to believe little old ladys. You MUST protect yourself here with documentation and calls to the police before it gets much more out of hand.
Most police dept's don't want to make arrests on these calls, especially in neighbor disputes, but if laws are clearly violated AND there's an increase or exacerbation of tensions, AND a chance of violence, they will. Just make sure it isn't you.