"How can she honor her mother (who will at some point perhaps need to live with her daughter as she ages), yet protect herself and her family? The daughter is a practicing Catholic."
This is a very disturbing situation, especially because the mother has already used her occult "gifts" on family members - a defenseless baby no less!
This is why my first recommendation is that your friend consult with a priest who is familiar with the occult (a local charismatic prayer group will probably know of one in your area) and seek counsel from him on how to handle this situation. He will also be able to advise her on how to remove any harmful bonds this medium might have established between occult forces and the baby.
In the meantime, she should take every step possible to protect herself and her loved ones from any occult influence that might be directed toward them by this medium.
First, she should have her home formally blessed by a priest. Keep holy water and blessed salt in the house at all times and use them frequently. Blessed objects should also be present throughout the house. Be sure family members remain in a state of grace at all times (confession once a month, Eucharist once a week if not more) and be invested in the Brown Scapular of Our Lady of Mount Carmel in order to deepen their commitment to Our Lady and avail themselves of the promises of protection She offers to those who wear the scapular with the right intentions.
This blog will give you more detailed information on keeping the home safe and/or ridding it of evil.
Second, your friend should do everything in her power to convince her mother to leave this dangerous line of work. Read up on the occult so that she can understand how Satan operates and can explain it to her should she be open to hearing the truth. A good book that is easy to read and is very informative is An Interview with an Exorcist which is based on the experiences of the exorcist, Father Jose Antonio Fortea. Hauntings, Possessions, and Exorcisms by Adam Blai is also packed with important information about the machinations of evil.
This information may help her mother to see that if she has been dabbling in the occult for many years, these spirits are controlling her, not the other way around. People who get involved with the occult often do so out of a desire for power, whether they are aware of it or not. This is why Satan hides his motives and lets them think they're in control even while he is orchestrating everything from the background. He is fully aware that there is only one power able to control him and His name is Jesus Christ. Once this is revealed to her mother, she should be reminded that Jesus is infinitely merciful and quick to forgive even the most hardcore worshipers of the occult if they sincerely repent. Redemption is possible for her!
However, If this woman is not open to the Truth and refuses to repent and disassociate herself with these practices, some other living arrangements should be made for her. If she asks why, your friend should tell her the truth, but do so lovingly and with great compassion. There is always the chance that her honesty will touch a nerve that could bring this woman to repentance.
It's also important to remember that Satan can only do what God allows, which is why your friend and her family should remain close to God with simplicity of heart and good will. Our God is a good Father who takes care of His own. Call upon Him and His angels for protection when around this woman.
Most of all, continue to pray for this situation. This is a supernatural battle which must be fought with supernatural weapons - of which we have the superior firepower. She should stay focused on Jesus and His desire to save this woman's soul and protect her family - then let Him do the rest!
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