You have to stop the playdates. It is not fair for your child to be hurt like this and it is certainly not her role to be the punchbag while her friend learns some control. Parents teach not other kids.
Can you phrase it in neutral terms to your friend? Something like seeing as they aren't playing nicely together at the moment or that they aren't getting on too well right now.
I have been in this situation with three friends. It resulted in phase-out for two of them after months of escalating aggressive behaviour because, although they tried to sort it out I didn't feel that they were doing enough (ignoring/excusing it a lot) & the issue was never fully acknowledged. (like, in your case, although she's a good friend she's living in dream world suggesting that your DHs meet up with the kids instead). It just became a massive source of stress every time.
The third mum was the total opposite, readily acknowledged the situation, told me how she planned to deal with it, asked me to support her doing it and told me to feel free to discipline her child if I see anything she isn't on to.
The difference in attitudes was really marked. Also it helped that in the third scenario it was clearly just a phase, born out of over-excitedness more than anything else and he's a lovely little boy, whereas the other two were (& still are) vicious little bullies who would wait until they thought no-one was watching and hit my kids with whatever weapon they could find.
I know it is a tricky subject but friendship goes two ways. I hate the way mothers find themselves treading on eggshells when their kids are being beaten up. If it was mine (and Sophie has bitten a friend once) I would be all over it, remove her (them) immediately and be the one suggesting leaving the kids out of it for a while.
Ethan is presently quite challenging around other kids. He's not aggressive but you can tell he finds it stressful and/or overstimulating and we end up with lots of crying and tantrums. He's particularly bad around toy sharing & has an almost obsessional attachment to certain toys. It's a royal PITA but basically means that I can't socialise with my friends at the moment. I still see them for play dates but most of my time is spent one-on-one with Ethan guiding him through it. I'd like to sit and drink coffee and gossip but right now it's not going to work.
It's hard, whether your child is the bully / bullied or both.
We're meant to be the adults, though - so it's up to us to step in where our kids can't.
Sucks big time, though!!! I certainly don't fancy you having that conversation!