I wouldn't feed a child ham because of all the crap that goes into some of it. I don't eat meat myself, totally respect the fact that some people do, but am also aware the some friends don't touch processed hams because of the recent contamination/cancer scares. I would never give a child something that I knew was off the menu for them.
I would try to agree the facts first before charging in. The child is young and trying to get the whole truth from a youngster isn't all that easy. The mum may have been 'joking' but the child took it deadly seriously and got upset. I was a shy kid and would have been upset if someone had tried to do this to me (not that I was a veggie then).
I'd speak to the mum to ask if she a) was aware the child is a 'proper' veggie, b) understood that actually means meat, fish, etc even if it doesn't look like it, c) ask if she was aware that the child had felt that she was being encouraged to eat meat at the house and was upset by it.
I'd be pissed off but its not suprising. I've heard it all in the 26 years of being veggie 'it doesn't count' 'its only chicken stock/gelatin etc' 'it won't hurt' 'you neeeeed meat to live' etc etc etc.
I'd also have a chat to DD to remind her why she doesn't eat some things, that some people do, but that both are OK and each to their own.
Don't get angry - you have years ahead of this.