DH is Dutch and lived 25+ years in Holland/The Netherlands and calls his country by both names. All of his relatives and friends are the same and don't mind either term and use both terms themselves. I think that local lady was just in a bad mood.
What the Dutch people I have met do get really irritated with is thinking that Amsterdam is a country or if someone says something like "lDutch, Danish, German... it's all the same, right????"