From what I understand, the British and also people of many of its former colonies (not including the US) regard the royal family as a living national treasure. Being an American, that's beyond my comprehension, but I'm willing to respect it if I ever visit.
From what you describe, I'd say the lady deserved to be offended, not for her reverence of the royal family (just part of being from where she's from), but for her attitude toward you. If you'd have managed an insult about something about her personally (e.g. her appearance, scent, physique, etc.) it would have done just as well.
As for royalty being like welfare... that reminds me of the time I was in a grocery store and got behind an unusal shopper. I'm a government worker, so I won't be getting rich off my current employer and I do have to be careful, but that's okay because at least I earn every bleeding red cent I have. The lady in front of me at the checkout line had a shopping cart loaded down with snow crabs and some weird kind of vegetable (probably bok-choi). The lady had that nose-in-the-air look about her that you might expect from a snotty rich person, so I'm thinking "Okay, don't know what a rich person is doing in this redneck part of town but I suppose she's got just as much right to be here as I do." Then she whips out her credit card. That didn't seem so unusual, because I used to have an American-flag-themed credit card. (Chose that particular design during the whole post 9/11 patriotic frenzy, "America, fuck yeah!" and all that.) Then I remembered how a store clerk once warned me that my patriotic credit card looked very similar to a welfare card. The lady paid for her groceries and then got cash back, not a round number but her remaining balance down to the cent. Folks, that wasn't any fucking credit card she had. That was a welfare card. I still eat ramen noodles sometimes, and that bitch was buying snow crabs, lots of 'em, WITH MY FUCKING TAXES! Sorry, but I thought people on welfare were supposed to try to find "high-mileage" foods that give them the most nourishment for the dollar. Holy shit.