I am not sure I would ban her, as Tuam suggests, but I would restrict how much time she spends with you. You do not say how frequently you see her, but perhaps restrict her visits to twice a week for 2 hours or something like that.
I would also firmly contradict her when she says you are not the most important person in your childs life. Say to firmly, but kindly, that if she were to look in any baby book. The first thing she would read would be paragraphs about the importance of the mother and child relationship.
One question that occurs to me is that she herself may have mental health problems. You do not mention your DH's father, so I assume she is single/divorced, lives alone, possibly lacks other friends and interests, so over focusses on being central to her son's life.
In the end, your DH is going to be the person that deals with this and has to tell his mother firmly, that she is a grandmother, not the mother and that in your house she must respect your rules over bringing up your child.
Rules could be not saying or suggesting in any way that your child needs anything but their parents, not taking him out of the room, and away from his parents at any point, anywhere when allowed to hold him.