Hello Seasons,
I wrote all this during Hoppy's reply. Great ideas Hoppy!I feel for you. This all becomes very tangled up very quickly.
I don't know if I have answers for you but I can share some of what we talked about with our own kids.
1. The pathological psycho. We sat our kids down and very calmly explained that Aunt Evil had a very hard life and this affects how she treats other people. We hope that she can see her way through but in the mean time it is our job (H and I as parents) to protect our children from mistreatment. We then gave specific examples along with how we felt about that. We made the point over and over that it is never OK for ANYONE to treat another X way (fill in your own example of over the top abuse), not even a family member. We also illustrated some situations that our PathPsycho would create and pull them into, and then completed the picture of what would happen if H and I didn't intervene. Eg. Our six year old was put "in charge" of their extremely destructive toddler. Toddler was about to throw a china plate on the ground and six year old would not be able to stop that...this really happened and I pointed it out to my brother who simply said "Oh?! Thanks!" I asked my kids, now, whose fault would it be for the broken plate? Their eyes just popped open. I said, you would feel like it was your fault because you were "in charge" but really, who was the adult making the decision to put you in charge? Aunt Evil.
How did you feel when toddler kept hitting you and Aunt Evil was the adult in the room and she did nothing to stop it? They said, yeah, that was weird.
2. Just this year another relative was coming to town because her d had a competition in our part of the country. This was the only reason money was spent. This relative is very selfish and always puts her kids on "show" for the rest of us and ignores whatever is going on in the rest of the family. We are her audience. We had run the "I'm in town" gauntlet with her before. This means becoming an accessory for her to show off to her local friends, standing there like a lamp while she talks to the friends whose kids also travelled to this event, whom she sees all the time at home, and having her d blow off our kids as complete irrelevant nuisances. One of my kids really wanted to see them, and I told her all of the above and that we just didn't have time. I felt a little guilty for her sake but wasn't going to inconvenience myself for several hours to get...nothing.
3. Same family as #2. We would have extended family get together for vacation. Total disaster due to competition between cousins and no refereeing from above relative and her H. Her H is the epitome of the absentee father. He will not engage in any interaction. Totally hands off as far as the kids are concerned. His son drills a football into my d's face. His son slams a chair leg down into another kids foot. All of these cousins act out their anger at their mother on my kids. Verbally abusive, etc. Not my idea of vacation. So we just don't do it anymore. Again, we explained this to our kids. We do still get together, but with much less exposure time.
If you are looking for a legitimate way out of christmas, you could plan a trip to some special place. Some special experience that also counts as a gift to your kids. It may be too late for this year, but how about next year? Knowing that might enable you to tough it through this year. How about you use this year as a learning experience for your kids. Say, OK, I know family is precious, but here are the problems we have with it. Make your own observations of the good and the bad. Maybe give your kids a chance to turn your motivations around? So if you have to go, you are doing it for your kids? And vice versa, they might realize, hmm, maybe mom and dad are right. Your kids might agree also if you have a worthy fun alternative.
Another idea. If your d is attached to one cousin in particular and the feeling is mutual, can they come over by themselves for a special visit? They might love to get away from the Ns in their family too.

Your daughter has love in her heart and wants to give it to her family, whether they deserve it, appreciate it or not. So kudos to you for wanting to respect that and give it some consideration.
Hope this helps a little bit. Hugs, MP