@chai2,
Quote:...the gift itself was the art, not the frame...
I think it's the OP who defines what she feels was her gift. She's made it rather clear that her gift was the total package--a framed, matted painting. She made an effort to display her art in a particular way, when presenting it to her friend, and her friend subsequently violated her decision, about
her artwork, and then compounded the faux pas by re-gifting the frame back to her.
If the gift was just the art, none of this would have bothered her. But it did bother her, and I see no reason not to respect her feelings or how she reacted to her friend's behavior. To re-gift the frame back to her, particularly without an explanation, was thoughtless and somewhat insulting. She's entitled to react with a tinge of anger--what her friend did to her gift upset her, and she let him know that. But, even after she let him know she was upset, he acted like it was no big deal, he "brushed it off". He really owed her an apology even if he had inadvertently hurt her feelings.
If she really values this friendship, she probably should just let this pass. A gift of one's own artwork is a highly personal gift, and if she doesn't like how this particular friend treats such a gift, she should not give him such gifts in the future. Unless there are other problems in this relationship, or this friend is generally thoughtless or insensitive, it's probably not worth making a continuing issue about it.
And I can't see any real reason why she would want to treat it like a joke, as others have suggested--that really wouldn't be an appropriate response, given her real feelings about the matter. What her friend did was wrong, including just brushing off her feelings about it. It's better off forgotten.