This sounds dreadful and I think you should go for it. I know what you mean about the time factor but with a shock like that it can take people a while to get strong enough to take something like this on.
I suggest you go first to your local Citizens Advice, let them know the situation and see what they say.
You can also speak to the people at Shelter because they deal with rogue landlords a lot, as you can imagine, and they will be able to give you ideas.
You should definitely pull together as much evidence as possible of everything that she did and everything that you did, including bank statements, any written (or emailed) notes you got from her, any copies of the contract etc. The more evidence you have, the better. What a shame the police didn’t do anything. It sounds like something you should tell the Council about once you have had satisfaction from this nasty landlady.