What to do with my neighbors?

My neighbors are accusing me of telling on them regarding not getting a fence permit. Now she doesn't want our children playing together anymore. I did not tell on her. Its not fair to the children that she has to be that way. My husband wants to talk to her husband to try to straighten this out but I don't think it would make a difference. She was very rude to me and obviously has a lot of issues. Should he even bother making it better or just forget about it and let her stew in her misery!