From the sound of it, it may be that that woman is not so much as ignorant, but rather either malicious, self-righteous and judgmental, or very very angry and miserable. It is possible that (a) that woman was just diagnosed with diabetes, and feels herself to blame but doesn't want to do so and so lash at someone else, (b) someone close to that woman was just diagnosed with diabetes, blames that person but can't and so lash at someone else, or (c) someone close to that woman developed complications (or worse has died from complications) brought about by uncontrolled diabetes. Whatever the reason, there is no justification to lash out at complete strangers, especially when that woman used the children as her excuse to release her anger, guilt or misery.
But the mother gets my admiration for setting an example to her children of not stooping down to that woman's level. We need more people (especially parents) like her.