I would have done the exact same thing as you. I would have been speechless, and then cried the whole way home.
I'm not gutsy or witty enough to come up with good things to say to other people, let alone other moms at daycare (our equivalent of school). I'd probably just smile and say, "oh, it's ok, it's not communicable, and your kids are totally safe", even as she insisted. I'm totally shy when it comes to other parents, although I might get feisty if it was about my own kids...
That teacher is amazing to pull aside that mom and try to talk to her. But honestly, if she's that ignorant to keep insisting that it's communicable, then I guess I'd just try to let it roll off me. She's not interested in learning the facts, so what can you do other than try to set a good example?