I agree with you. She knew what the situation was when she moved in. Also, I would ask her to contribute to the renovation. It is ridiculous for you and your husband to put yourselves in debt. If she is living in the home and working, I just feel like she should contribute something to a space that will be hers. (Does she work outside of the home, or is she a SAHP? If she does not work, that could be another source of stress.) You may take on this debt, and she might move out before completion. Bills or contractors--if they are being used--will still need to be paid. That is something to think about.
You might not be able to change the past, but you both may have unresolved feeling surrounding the events that transpired. She might be harbouring resentment or feeling jealousy. Maybe her needs are not being met, but if so, she needs to take that up with him. Have you ever asked her directly what her issue is with you? Sometimes you have to address the elephant in the room, and if she is tense towards you when she is "calm," that leads me to believe she might have something against you personally.
Can you recall when first noticed the shift in your relationship with her? What was going on around that time? I know some people hop out the bed hating people, but sometimes it is gradual and happens over time. A therapist can help get to the root of what started this.
I agree with Mags, and I would add that your husband needs to be protective of the child he has with you, too. Infatuation or not, I hate to be blunt, but at some point, he might have to stop thinking with his dick and start using his mind. Empty threats mean nothing. This sounds like it has been ongoing, and he is not actually going to ask her to leave.
I hope it gets better for you.