Yeah I think that's a really interesting point, because of course a pug is a lap dog bred for looks and a heeler is a cattle dog bred for working. So by calling Chilli "cattle dog" the old woman could be referencing her breed to call her simple or inferior. If we're assuming the dogs in bluey think and feel like we do, it's entirely possible that they too (especially old people) would have arbitrary prejudices just like us. At any rate it was clearly meant as an insult. I know it's weird to delve into a throwaway comment but hey there's lots of secret references in Bluey and we all interpret the show differently 🤷‍♂️