If this was an honest question, and paneech gave an honest answer, I don’t think there’s anything wrong with identifying a fairly common (but no less offensive because of it) use of the word. That use appears in the dictionary for example.
Of course it would have been better if he had identified it as an offensive use that shouldn’t be taken lightly, but then again, Judy probably knows what a Jew is and is just asking to see how folks would respond.
Again, I’m not advocating the use of the term in that manner. But the question was set up as if asking for a definition to a quoted term. A complete definition would include all uses, even reprehensible ones, no?