I'm all for honesty and for enforcing boundaries--especially in your own home! First of all, I would tell these people BEFORE they're invited and BEFORE they get there what the house rules are (no dogs allowed on my property--meaning, she has to leave it at home, only eat here, only drink here, etc., etc.) Then I'd politely tell her what happened last time and that it was not enjoyable for you and your family. Once you've made the what and the why clear, then and only then can you leave it up to her whether she wants to play by your rules or stay home!
I'm a big believer in boundaries, and I don't see any reason why you should be run over and taken advantage of in your own home! That's a bunch of BS--and the fact that's it's family doesn't matter one bit!! After all, every hotel, amusement park, and restaurant has ground rules for their establishment, so why should your house be any different?