How should I treat this self-centered friend?

Cutting off your friendship with her seems really unnecessary at this point. You should join the group with your other friends, and she can seperate if she wants to. She's only causing problems for herself, and you shouldn't bend to her will just because she has the nerve to give you an ultimatum like that.

At the same time, this is nothing more than a petty squabble. Why would you distance yourself from her over this? If all you're going by is what your friends have told you and her not wanting to work with those friends that she knows don't like her, then that's not much. Be careful not to put yourself in a situation where she can stab you in the back, but she deserves a chance to show you that she won't.

Jam it back in, in the dark.