Toddlers take everything they hear literal. So thanks very much for undermining a parent by telling the kid that the parent is cruel and is doing something wrong by what they did (when the parent did exactly the right thing). I have no idea how this can be seen as humerous from any perspective.
I don't know that the bolded is universal - my toddler certainly did not take everything she heard literally. I think many toddlers can recognize nuance and understand when adults intend to be funny. For example, the "I've got your nose" game. Some kids are terrified by this; others think it is hilarious. In the situation of the OP, I think the fact the lady had a huge smile makes a world of difference.
I agree. And if it were true that toddlers take everything literally, can you imagine how confused they'd be with all the nursery rhymes and children's songs they hear?
I do think that a toddler may take a stranger in the real world saying six unpleasant words to them (nice smile, creepy smile or whatever)seriously, just as likely as not. I think it would depend on how much the child interacts with strangers and if many adults are jokey and sarcastic with them.
But the same child who may take a stranger and their words seriously, may also not be phased by the giant and the beanstalk in their bedtime stories. I was o.k. with nursery rhymes but bible stories confused the heck out of me and were quite scary when I was very young. (Specifically the Cain and Able thing, I couldn't get past the judgement from the creator and the murder and that meat was better than food grown, man, I thought about that one a lot!) But I agree it has to be regional, because so many OP's say they have heard it and said it. So it's probably something the toddler has been exposed to.
In my area, it would not be well received.