The very first question both the mrs and I have to ask here is .. is the mother greek? Seriously, this woman sounds like the female version of my father-in-law .. to the letter .. minus the emotional outbursts part, but yeah, everything else is exactly the same. He doesn't like me .. period .. and he's not concerned with concealing his disdain. He is never to be pleased with anything my wife does in her life, is always condescending, judgmental, and verbally abusive to the point of bringing her to tears. He is retired, and makes it his life's work to tell her at every possible opportunity what she is doing wrong in her life and makes every effort in controlling everything she does .... think micromanagement to the highest degree and you'll be close to what this guy does to her.
A huge plus for us is that we live some 500 miles away and we don't usually have to hear from her parents, unless it's a call or a necessary visit. I understand that is not an option for you right now, I'm just saying, it does help. Make no mistake about it, my wife's father does love her very much .. as much as any cruel bastard can love a daughter I suppose, but cruel bastard he is indeed, to both of us. He has impossibly high expectations for us that we simply cannot attain and has no idea how to express his love for her without being a total jackass.
That being said, I feel qualified to say .. I can relate. These are some suggestions I utilized and they worked out for us, so far at least .. the dad still doesn't like me but we're happy. Maybe some of the things we've done can help you too. First, sit the daughter down and set things straight WITH HER. If she is not with the plan, there is no plan and you may as well start packing. You may have already had this conversation, in which case you can skip to the next part, but BE SURE she is with you on this or .. seriously .. you've got no hope in salvaging this relationship or your sanity. She MUST support you over her mother in this conflict (and you MUST remain worthy of that support) .. there really isn't any room for anything short of unity in this situation. Make sure you love her AND she knows you love her .. without question, and that you support her AND her relationship with her lunatic mother .. BUT .. your love for each other trumps the relationship with the mother and must come first .. period .. there can be no debate on that.
Next, if the daughter is still with you on this .. enforce positive relations between the mother and the daughter through the daughter. Emphasize on the positive aspects of them maintaining their relationship and reaffirm their love for each other. Help her to understand that her mother won't always be there to support her OR frustrate her through the same nagging ways most all parents hassle their kids about living their own lives. The idea here is to place more focus on the positive aspects of their dynamic and reduce stress from the negative ones by reducing them systematically. It's not an easy thing to accomplish, but the effort will pay off down the road, just trust me on this one.
If you've gotten this far and are ready to move on, then you need to confront the mother. You've already stated you have no fear of the woman and have been more than patient with her behaviour. Let her know .. RESPECTFULLY .. that this is your line in the sand. You intend to marry her daughter and be her husband for the rest of your lives and she needs to come to terms with that. Be direct. This is how it is and there isn't anything you can say or do that will change that .. and stick to your guns. Let her know that her behaviour towards you is no longer acceptable and neither is her treatment towards her daughter. She is either going to respect you for making a stand to protect your relationship with her daughter, or she is going to hate your guts even more. I'd say the risk is worth the reward.
If her mother is as insane as my father-in-law, dude, you have my sympathies. To this day, I can't stand my wife's father and he can't stand me, and he still does some of the things we both dislike. After five years of this, he has at least accepted the fact that I'm not leaving and she isn't either. On the bright side, the relationship I have with his daughter is the best .. she is my everything, man.
If this girl truly is your everything too .. never let her forget it and stop at nothing to help her mom see it too.
In closing, my wife is co-writing this and won't shut up until I say this .....
To her: it's not going to be easy. This will be an everyday / all the time situation that you will have to decide between your mother and your fiance. As long as you are following your heart, the happiness WILL outweigh the pain.
To him: stand your ground against the mother and be a strong backbone for the daughter. There will inevitably be tears, and when that happens be the shoulder she can cry on, and remain patient.
From both of us to both of you .. this is not an easy situation to deal with, but if you love each other as much as we do .... it's worth it.