Going to have to agree with most of the other people here, maybe she's just a little intimidated by being in this big family of amazing bakers. I mean, being in the newbie to the family is always rough enough, but it's especially so when there's a situation where everyone is great at something, when you're...not so great. So she may just be trying to be a part of the family, you know?
I would definitely recommend NOT just straight up confronting her about it. She probably already knows her baking isn't the best, and having others confront her about it is going to just make her feel worse. What I would recommend is maybe finding something she has made that is...better than the rest, and compliment her on it. Ask what she did, and then maybe offer a few tips that she could add to it next time. These tips will obviously be things that are going to make it better by, you know, actually usually some 'real' baking techniques, but they could also just be things like 'Ohhh this would go really well with a little hint of cinnamon!' and things like that.So this way you're progressively adding to her abilities.
On the other hand, you could try the the more direct approach. Say that you recently found this great little cookbook that you thought she'd really love! Especially if it is a cookbook which is either focused upon, or has a lot of recipes for things which she has tried in the past.Or say that you recently just tried out a new recipe but it didn't come out as well as you expected. Ask for her advice, and go over the recipe with her. Maybe she can offer some tips herself?
Or as others have said...just ask her if she would prefer bringing something else to the party instead. Not everyone has to be good at baking. Bonus points if you find out what she is really good at-ask the hubby, he'll know-and start saying that you'd really love her to bring whatever dish it is that you know she's quite good at. That way she gets the feeling of actually adding something to the party, without the stress of trying to compare to you guys. AND you've got a really nice dish, say, BBQ chicken wings, which everyone will love, and you'll be able to ask her HER for tips on how she made such a lovely dish!