It sounds like she thought she not only already had the job, but was in some type of management position. I think you should have interrupted her and said "Ma'am? I'm calling to do a brief phone interview. I have about 10 questions to ask you, and expect it to take about 15 minutes. Are you ready to begin?"
This is a nice tactic!
As is Bexx's suggestion of saying, "I'm sorry, I have a meeting," just to get you out of it all.
And JenJay's point about people feeling that the job is theirs, and how that influences (and ruins) their approach is really true--I've seen it.
It can be very offputting.
I don't want people who apply with me for a job to grovel or to feel unconfident in their abilities, but I want them to recognize that *I* get to decide, and that they have to please me in order to get through the gate. And that there are other people in the running as well.
and I'm with lowspark, once you know you're not going to hire someone, it's not really polite, actually, to let them go on thinking they've got a shot. Or to use up their time -or- yours.
But boy, do I get the "caught off guard" part. This is your learning experience--think how much better you'll be at taking control next time something somewhat similar comes up!