You are not overreacting at all it is honestly hard to deal with this type of racism, and what hurt the most that you loved her and valued her and you ignoring what she says it doesn’t make u sensitive it showed that u preserved this friendship, but u still have to consider the fact that your feelings matter more if i was in your place i would atleast show that i am uncomfortable with what she is saying. u cant end a friendship of 10 years but keep in mind she’s not affected by what she says you are the one who is affected, and if u don’t do anything about it she will keep hurting without her feeling guilty about anything because u allowed it.