I understand you wanting to keep her children in your group. Maybe if they get good positive teaching from you, they won't grow up to be nasty. Maybe you can help save them from being like their mother.
Too bad there isn't some way someone (not you, but from higher up of 4-H leaders) could use that as an opportunity to teach all the kids who heard those hateful and inappropriate things, that such things are so very wrong to do and say. A chance to teach acceptance of others and not to hate and be mean to anyone who is "different".
As for the person who said that; she must be awful full of hate and venom. She was beyond wrong to have said any of that to you. But sadly, there are people like that who have to be mean and vicious to others, so they can try to make themselves look better to other people and also to try to make themselves feel better than others. They can only feel ok about themselves when they tear down others.
It is also sad, that in this day and age, larger people are still victims of whoever wants to be hateful and vicious to us . Over weight people are still fair game for verbal abusive attacks.