It's a tricky situation. My opinion is that regardless of the law you shouldn't just ignore the situation.
From what the breeder wrote to you, to me it doesn't sound like she's demanding the horse back, but just inquiring who your bought it from. If she sold multiple horses to someone she could have lost a lot of money. If you have a bill of sale and have owned and cared for the horse for two years I would think that the breeder would have a hard time claiming the horse back this far down the track. She would have to prove her ownership as well as explain why she has not yet pursued this.
I'd just tell her the situation, say that you bought your horse two years ago with a bill of sale and had no idea of this situation. Even tell her how great a horse she has been and how much you love her. Tell her you have been trying to contact the seller to get the papers but have been unable to, and pass on the contact details you have.
Ignoring the situation doesn't make it go away. If she pursues it further then contact a lawyer.