I had a wacky mom that flew off the handle on a whim, constantly embarrassed us by making scenes in public when people "wronged" her, and creating drama that was never "her fault." So I totally get how her poor boys must feel. This isn't the first time I've seen her go off on somebody, it's just the first time that I was the target and it really freaked me out! Thankfully, things have been very very quiet since the incident first happened. Her boys (age 9 and 11) haven't been around much, and school starts in another week so we'll only have to worry about it in the evening. I've been keeping my kids busy, taking them to the park and for bike rides so that they're not in the yard and being judged by the back porch drunk. ;)
My son saw her boys playing outside last night and really longed to go play with them. I had to remind them that they're off limits because of all the trouble. Her boys are older than mine (age 7) and in my opinion, just really don't need to be hanging out with him because no good ever comes of it.
We do have a fence separating our yards, but it's open in the back (we have a creek that runs along our back yard so a fence won't work there) so the kids are used to slipping in and out of eachother's yards.
Thanks for all the thoughts and tips. It has really helped calm me down, and I think I'll be able to better deal with a situation like this in the future. With any luck, there won't be any future situations. ;)