Mary is too selfish to be able to consider the feelings of others, but I do not think she actually knows about Elizabeth and Mr. Elliot, not only because she might have been young or away at the time, but because nothing ever really happened between them. There never was any kind of understanding. We are told in Chapter 1 that Elizabeth has had a disappointment. But IMO, she is only disappointed because she has believed the foolish idea that Mr. Elliot is the most (maybe only) proper match for her, an idea which has been encouraged by Sir Walter since she was a young girl. Mr. Elliot is probably mortified to find that two such people as Sir Walter and Elizabeth have their hopes pinned on him. Remember that Sir Walter forced an introduction with Mr. Elliot and encouraged him with regards to Elizabeth and invited him to Kellynch and expected him to come for two years—but he never came and eventually emancipated himself from further application by marriage to a wealthy lady of a lower class and the shocking disrespect with which he spoke of them.

If Mary was at home while Charles tried to court Anne, she probably would have considered her marriage to him as a sort of triumph over her sister and the memory of it would only be agreeable to her. Maybe this is why she feels superior enough to always “claim” Anne instead of “inviting” her for a visit. If Mary thought of Anne as a rival for Charles it might also help to explain why she tells Anne about how Captain Wentworth said “You were so altered he should not have known you again” and why she crows about his attentions to her in Chapter 7. Of course Mary’s insensitivity would also explain it but this idea of Mary considering Anne a rival is very interesting. Although considering how Anne turned down Charles this feeling of triumph would be vastly unwarranted—but we are talking of Mary, who sees things according to how she wants to see them, changing her outlook daily if need be, to suit herself. Then again there is no telling in what condition the story got to Mary, if she does know, because, as we found out in Chapter 10, the Musgrove family thinks Lady Russell persuaded Anne to reject Charles and we know that to be untrue from Chapter 4.