Status seeking confusion

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This is a bit of a long explanation sorry but I want to be clear -
I have been told that within hierarchical social systems, status seeking behaviour is much like the so called "ladder climbing," attempting to be at the apex of this social pecking order pyramid through status-giving areas such as money, popularity/fame etc, whether for power over others or personal emotional gratification. I'm only theoretically aware of how this works though as I can't think like that myself.
Thing is, I am being confused by someone who constantly displays this kind of behaviour at me in a way I don't understand. I can try to simply avoid her, but she lives in the same building as me and occasionally, our paths are bound to cross. Plus I am trying to be superficially social with the neighbours to minimise trouble and drama. This person often corners me and proceeds to elaborately self-praise in a way I wouldn't have thought possible with a straight face before I met her. I have made sure she isn't joking. She constantly tells me that she is wonderful at every job she has ever had, and she has only been unemployed for the past few years because others were too jealous of her outstanding work and felt their jobs threatened because she is so much better than any of them. She also constantly aligns herself with various people in politics, armed services, journalism, medicine etc by repeating "they're a close personal friend of mine" or "the kind of people I mingle with."
She tells me that anything from community forum panels to international terrorism correspondents seek out her opinion and ask her to comment, through online articles that she simply writes herself. She often claims she has been the target of attack (again, online) by people in various institutions (again, ranging from international politics to the local neighbourhood centre) because of her articles or because of the people she says she knows. She tells me that she has great influence in various areas, often detailing how much money was involved in her endeavours, and how much change is due to her alone.
Now, some of this may be factual for all I care to know, but I'm unsure as to why she is doing this and why she feels the need to do this to me in particular. Unlike this person, I'm well aware that I'm hardly the kind of person one is desperate to impress if they are a status seeker as she appears to be. I'm confused by what she expects me to do or say. Even if this is entirely factual (which I very much doubt, given her humble circumstances) I still wouldn't be impressed by her, because this is not the way I think. The fact that she apparently knows parliamentarians and journalists is irrelevant to me. I'm also confused by watching her talk this way to others when I'm around - they either believe her obvious confabulation or are simply humouring her and agreeing so as not to embarrass her. For my own part, I'm stuck as to how to respond. I seem pathologically incapable of straight up lying so that's not an option, and I doubt my immediate instinct of refuting her claims and launching into an analysis of this type to her face is likely to go over very well either. I don't want to invite the petty drama she is likely to resort to if she has a problem with me not being suitably in awe of her.
If you've read this far - what is the explanation for this kind of bizarre behaviour? How would one diplomatically handle someone like this?

Is there any evidence to substantiate the things she says? After all, it may all be true. From what you've said though, I doubt it. You could always try and get the opinion of someone else she speaks to but be very careful how you do this. Don't say anything that isn't completely factual or unkind. Don't ask leading questions designed to get particular answers. Assume that the person you speak to will relay your conversation back. (they probably won't but it may help you to be cautious.)

Alternatively, do what a lot of people do. Just try to avoid the person. If you get caught then have some excuse ready like: "I've got something cooking that I need to check on." or "I've got a but/train to catch" etc.

Something else to consider is that this person likely has troubles of their own. Be kind and considerate. Perhaps give her some time occasionally.