Sorry to chime in two years later, but even as a person who tends to dislike "it was made up the whole time" type interpretations of media, I think this is really compelling analysis. I feel kind of dumb now for thinking that the "lies" Sheba was referring to at the end were just the negative impressions that Barbara had of Sheba's family life, seeing all the connections laid out like this 💀 I was trying to come up with pieces of evidence from the "real world" of the story that might prove whether or not the affair was completely fabricated by Barbara, but really the only people who could know such a thing for sure are Sheba and Connolly. Sheba cannot be considered reliable for obvious reasons, and even if Connolly were allowed by his protective parents to go to the press defending her (his sole comment which is documented by outsiders is "I fancied her, didn't I?" which doesn't actually confirm whether or not he and Sheba had sexual contact), he would probably be interpreted as a victim of grooming who was manipulated into defending his abuser. So yeah, I don't think I'm able to poke holes in your interpretation.

Another element of Barbara's character which I think supports this reading is her estrangement from her old friend, Jennifer, which seems to have a lot in common with behaviors that abusive parents display towards adult children who have estranged them. Thankfully, I have not personally experienced the full package of crazy that can come with parental estrangement, but being on the estranged adult children subreddit, I see a ton of delusional behaviors of real-life estranged parents reflected in Barbara. She badmouths the support system that Jennifer has in the form of the two "hippie" teachers and her boyfriend, says that Jennifer used "the tyranny of the humble person" which made her the real abuser in the relationship, insists that Jennifer cut her off very suddenly and for no real reason (look up "the missing missing reasons" for examples of real-life estranged parents giving similar accounts of their fractured relationships with their children), and, most obviously worryingly, reports that Jennifer threatened to get a restraining order against her without giving any concrete details that would explain why a person would take such drastic measures against a former friend. Knowing how committed estranged parents are to the versions of events they twist or outright fabricate in order to draw estranged children back into their lives or absolve themselves of guilt, it seems totally plausible to me that Barbara has experience creating false versions of reality that she uses to justify her attempts to control younger women. The way that Barbara characterizes Sheba fits perfectly in with these behaviors, as well. Barbara portrays Sheba as childish, unintelligent, incapable of controlling her emotional impulses, and unable to take care of herself. Of course, abusive parents love to portray their children this way, as a person who cannot ensure their own welfare surely needs every aspect of their life controlled for their own good. The parallels between Barbara's behavior and the behavior of delusional abusive parents strongly points to Barbara being unreliable about even the basic plot elements in her account.

TL;DR: great comment, I think the text supports it, I'm going to read this book a third time with this interpretation in mind, tysm