Am I overreacting? Should I just let it go since she is fine.
Are you kidding? Of course you don't let it go! You need to bring it to the attention of whoever is in charge, but you do it in the nicest kindest, non-threatening way that you can. There are still tons of people who think that a food allergy is no more serious than an allergy to grass, causing a few sniffles and sneezes.
The exact thing happened in Sunday School to my peanut-allergy kid, except that he had a nasty skin reaction. It was a new teacher, and I had just spoken to her the week before about his food issues (multiple allergies besides peanuts). This one day, they used PB as a glue for a graham cracker craft. My son got it on his hands, his clothes, and his hands made it to his face...he swelled up everywhere...eyes, faces, hands; his hands and face were covered with bright red blothches and he was horribly itchy. Everyone was in a panic, and the teacher didn't even know it happened because the reaction occured about 10 minutes after he left her class. (The craft was something to end the class period.) I wasn't mad, but I sure was alarmed!
I called both my pastor (good friend of ours) and the teacher (fairly unknown to me) and spoke in a firm, kind and carefully controlled and gracious way. I wasn't accusatory, and I didn't demand a "peanut-safe" envirornment (that's not practical and has a lot of potential legal ramifications) but I did suggest that they not use food as craft items, and certainly not peanut butter, a very common allergen.
The whole event sure did raise the awareness of everyone in the kid's church program! Our church is enormous, and that event got around pretty quick!
So, DO NOT LET IT GO! But don't be a crazy angry lady about it either! Especially with a 4 year old. My son is 8, and he has more ability to self-police his environment. A 4 year old doesn't.