Legal off-leash area - you didn't do anything wrong. She probably thought she had the whole beach to herself as well. Sounds like she was really frightened by the incident. If she knew she couldn't control her dog if an incident occured, and anything can happen at any time in a public area, then she should not have taken her dogs off-leash.

The off-leash area is for well socialised dogs and owners must know when their pets are O.K. socially to use the area. If you're not sure of your animals behaviour (because they are young etc) then don't take chances. Even walking yours on the leash in an off-leash area can become a problem (though not necessarily your fault, I just mean a problem if your kids get bitten or your dog gets attacked) if some idiot let's their dogs off-leash when they are not social enough. KWIM.

I hope this doesn't spoil any future outings for you guys. Sounds like a beautiful area to have for an off-leash area.