I have a real problem with women who act this way because it seems like there is no shortage of women these days who don't respect the fact that a man is TAKEN. And the fact that she is with your husband's brother makes it worse.

I love what Hopeless Dork said. Me being the smart aleck I am, I would have no qualms about saying something like, "Wow, I hope that bum of yours has seen a bar of soap today," or "If your derriere gets any closer to his (insert your husband's name) face, a stiff stray hair is going to scratch his cornea." That should accomplish several things...embarrass her (hopefully), bring your BIL's attention to her unacceptable and ridiculous behavior, and remove any trace of sexiness and allure in her actions. Not that your husband is thinking anything, but just a little extra insurance.

Either that, or your husband is simply going to have to firmly INFORM her that he does not appreciate her behavior, and it WILL stop.