I don't think anyone was rude here, but personally, I probably would have spoken to the other couple and said something like, "well, I guess we didn't need to reserve after all, as the rest of the train is empty. It's silly for us to all be squashed up here, so we'll move and give you more space."
I do think that since you were there first, they should have been the ones to say this (although they weren't obligated to), but since they didn't, I'd have picked up and moved, as you did. I think the woman's refusal to pick a different seat is odd, but not rude.