I'm kind of fence sitting on this one. On one hand, she sounded quite rude and aggressive towards you which isn't on. I also think in theory that hugging is lovely and innocent.
But on the other hand I'm looking at it from the school's perspective. End of last year or early this year there was a story in the news that was linked on the forum about a little boy that was suspended for hugging a girl in his class and wanting to be 'boyfriend/girlfriend. She apparently felt extremely uncomfortable and threatened by it and despite asking him to stop he didn't. Several on BH thought it was creepy. So the problem for the school is if they allowing hugging, where is the line? do little kids know the line between wanted and unwanted affection? how do they handle that? if hugging and touching is allowed (and I'm not talking about inappropriate touching, clearly it's a given that isn't on) do they then have a basis to stop it if it goes too far?