I understand that you must be feeling a good amount of pain but try to see this from her perspective. In her eyes, you ARE an active threat to her marriage. I don't know her, so I can't vouch for her being a bitch or manipulative. She does sound insecure but that doesn't necessarily mean that she's treating him poorly. How does she belittle him in front of people? I don't think it's unreasonable for her to want you and him to have less contact at this point. You two obviously have feelings for one another and perhaps she hopes that by limiting your contact, he can move on. And it also helps to eliminate temptation and the further growth of bonding and what not. This sounds like it's irrevocably lost in the short term. No friendship to be salvaged with her and it sounds like they're not trying to seek out much of one with you either way.
Have you ever experienced your husband falling in love with another? I think if you haven't, then it's pretty hard for you to really get where she's coming from. I dated a married man for some time who's wife was really hesitant. I never really got it until the next guy I dated essentially cheated on me all the while telling me it was just fucking and then is now in a relationship with her. After that happened, I began to better understand how she might have felt. Does that mean she should probably work on her issues? Yeah...insecurity is a problem but she also has no obligation to be polyamorous. It sounds like it's not that helpful for you to be in this equation right now. You're right, he does need to make his own choices and you have to let him.