I would have been mortified as well and most likely wouldn't say anything either. What a silly thing for that lady to do, why intently try and give germs.
Its not the same but I actually not keen when my son's day care teacher says she asks for kisses from my 2 year old and she says this to me a few times. I did ask him where and he pointed to the lips! she should make it the cheek if she wants a kiss, as my husband and I do or any any relatives don't kiss the kids on the lips. But like you I didn't say anything.