Wow, that's crazy! I think I last heard it used in the early 70's and it probably was while watching Archie Bunker though it is likely I also heard Richard Prior use it. In other words, it made for good satire at that time because it was a dated word used by people with dated views.
It's surprising to hear anyone would use that word today. She must have been tight with her racist grandparents to have even been exposed to such a word. But her excuse just revealed her white robe. That word is really unusual, too unusual to just make up. But to then say she didn't know its meaning? My reply is also from an older time - Negro, please!