I think the big thing is that in her head, you're like a son, so she's clearly very fond of you.
All folks have a vocabulary, and folks, especially folks from another time are likely to have a different vocabulary than what is current. It sucks that it's bothering you. She clearly didn't mean anything bad by the term. Actually, it sounds like she thought she was using an acceptable term vs unacceptable. She's not a different person than she's been in the past. But if it bothers you enough, then cease interaction. You don't have to subject yourself to anything that makes you unhappy or uncomfortable.
Try to let it go, and don't expect to change her.
__________________
Steve
'08 Boxster RS60 Spyder #0099/1960
- never named a car before, but this is Charlotte.
'88 targa

SOLD 2004 - gone but not forgotten