I don't think your over-reacting, sounds like classic passive aggressive behaviour.
In my experience the only thing that works in this situation is to behave as if you don't notice, and be friendly but always firm with the other person.
I swear to God that it seems to me that a lot of people who behave like this don't consciously plan their nastiness it is just the way they always treat others and it works for them quite well. People they don't like go away and people they don't mind dance to their tune (and mood swings!). It can make it a little bit more bearable if you think of them less like an equal and more like a grumpy cat you have to live with!