Okay, so you can both see the manipulation when it's through text/email, right? Instead of making the important discussions face to face, why not do it through technology? Normally that isn't recommended, because you miss the tone, body language, and all that, but in this situation you would be able to let her know the issue without being entirely sucked in by her "beautiful soul" appearance (I say appearance because she is NOT a beautiful soul if she treats people this way).
This way she would get the information necessary - that if she wasn't such a manipulative person (I struggled to say person, and I'm not one for name calling) you both would love to have her in your lives, but due to her past behaviors you can't trust that she has in any way, shape, or form changed so you need to step away to work on your primary relationship.
To me, it seems like you really want to help push her towards making some changes. By sticking around and just forgiving her or ignoring it every time she makes a mistake and treats either of you poorly, you are NOT doing that. Tell her exactly why, and then cut her off. Don't give her a chance to argue, don't let her manipulate/guilt you into softening, just do it.