Yeah, it's not the first time Japanese has completely bastardized english words (or how us English speakers do the same.... "hentai", "bishie", or even "anime" comes to mind
). Another example would be the word "Mansion". To the typical english speaker, you're thinking a grand, or extraordinarily large house. To the typical Japanese speaker, that pretty much means a high class apartment/condominium.
So yeah, literally she did say bitch. But the way she meant it, it's closer to the english word slut.