It's not that you should have cancelled, but that you absolutely shouldn't have put the "decision" about your holiday on her shoulders, when you had already decided what you were doing.
I did make it very clear to her that if she really needed and wanted me there, then I’d be there.
By saying that, you inferred that this holiday was optional to you ("if she said the word you'd cancel it"), but if it really was optional, as a good friend, if you wanted to be there for her you would have cancelled/changed it without even telling her. So she knows full well that you don't want to cancel it, you wanted to be on that holiday, not at the funeral, you knew it, she knew it, so it was pointless pretending otherwise.
Like when a husband says to his wife, I've arranged to go to the pub with my mates all day tomorrow, but I'll stay home with you if you "really want me to"... it's a form of emotional blackmail/guilt tripping to ensure they get to carry out their (already decided) plans guilt free. Anyone agreeing to it isn't doing it because it's what they want though, they acquiescence because saying no makes them feel like the bad guy, so the asker virtually guarantees the result they want by doing it this way.. it does leave a sour taste being the person on the receiving end of that though.
You had other very valid reasons for not wanting to lose that holiday and to be honest that should have been enough to give your apologies for not being able to attend, I would like to think your friend would have understood if given the chance.
Maybe you could contact her at some point and offer your regrets at putting her in an unfair position at a difficult time, and see if it leads anywhere?