Would you end a friendship over this?

Back story. I have two kids on the spectrum and one about to start the diagnosis path. This “friend” used to be my next door neighbor and we were very close for 5 years but she recently moved states. We were very close before she moved but she made a lot of off hand comments about my kids, poking fun about how loud they are etc. but I honestly brushed it off as innocent banter. She knows my kids have autism and was very sympathetic to my situation but I could tell she didn’t understand what so ever. Her own daughter was placed on an IEP by her school and she acted like it was the end of the world so I helped her through and gave her tips on how she could help her daughter succeed in school coming from a mom with special needs kids, she was very thankful and took all of my advice.

She recently moved states and we’ve mostly stayed in contact through text and occasional phone calls. She is newly pregnant and has a lot of questions as this is her first pregnancy (her daughter is her step child). She has texted me hundreds of times with questions and concerns and I’ve been more than happy to oblige.

A few days ago she went on a bachelorette night. I commented how awesome it was that she went and I hoped she had fun. She said they stayed out late and went to bars and hookah lounges etc. She then proceeded to say “I hope my baby doesn’t come out retarded because of all the second hand smoke and loud music I was around, I couldn’t deal with that”. I was STUNNED. How inappropriate is that to say to your really good friend of 5 years who you know has kids with autism?! I didn’t respond and I haven’t responded to any of her messages since. I’m so upset and honestly mad at myself for ever associating with someone who obviously openly uses that word on the regular. She knows that she messed up because he keeps texting me with random memes and asinine message clearly dishing for a response but I just can’t look at her the same. Am I over reacting here? I don’t even want to tell her why I no longer want to continue with the friendship because it’s so obvious or at least it should be to her by now. What would you do?