I think the actions of the dog are getting more and more exaggerated as the thread continues. The dog did not lunge, he moved in her direction and the OP pulled him back. The dog was at no time a threat.
From the OP:
...The walk was uneventful, but as we were on our way to the car we passed by a woman who looked to be in her 60's. Daisy loves people, and she started her whole tail-wagging "happy to meet you" dance, trying to lead me over to greet the woman. I didn't let her, and she was about ten feet away as we passed, but I think this lady must be afraid of dogs or something, because she took a step back before aiming two kicks in the dog's direction. The kicks were kinda feeble, but it got my back up.
...Now, Daisy is about 70 pounds and admittedly looks a bit intimidating to people who first meet her, but she's really just a big wimp. I can't totally blame the lady for her reaction, especially it she was afraid of dogs, but I was angry just the same.
I never said the dog "lunged" but the OP does tell us the dog was actively trying to get near the woman, heading in the woman's direction and it was only because the OP restrained the dog that she didn't get up close to the woman.
The OP also admits her dog is 70 lbs and intimidating looking. And the woman appeared to be in her 60's.
So no I don't think the dog's actions are being exaggerated. If anything I think the woman's actions are being exaggerated. She was visibly frightened, she was stepping backwards and her kicks were into the air 10 feet away
and "feeble" and while she may have been in great shape for 60 (which we don't even know) the reality is the average American non-dog-person mid-60's woman is not really all that physically able to protect themselves against a 70lb strange dog.
I think its important to note too, that while the OP had her dog under control the woman didn't know that. It was totally an act of trust towards a total stranger.
And the sequence of events was:
1. 70lb dog tries to advance towards woman
2. Woman steps back, clearly scared and feebly kicks at air
3. Dog owner verbally attacks woman instead of reassuring her the dog was under control and harmless
4. Woman reacts verbally in the negative.
So we have two acts of aggression coming at the woman from her point of view and two acts of response from the woman. At no point did the woman initiate - she didn't initiate physical interaction, nor did she initiate verbal interaction. All the woman did was react