Yea, I'm pretty sure she means what I call "straight plays". But I often struggle with the correct words of how to differentiate them, especially since many actors use "play" a as general term for both musicals and straight plays.
I'm not offended by what she said, but I think it's sad. I love her and value her opinion, and on a personal level it would make me happy if the creator of my one big fandom had a bigger regard for my other. Just like it makes me happy when I find out certain Broadway actors love Harry Potter.
I wonder if she's not been exposed to great musicals. Because I know a lot of people (and people who are infestered in theatre, and even work in the industry) who hear "musical" and only think of disney musicals or other showy, glitzy shows that doesn't have a deep meaning. I enjoy those too, but there is so much more to the genre, and there are so many musicals who have just as much depth than any play or opera.
About Harry Potter. How is is not "literature"? I think whatever you think about it, you can't dispute that. I think it's also great literature, and I also think it will be a classic in 50 years. It will stand the test of time be mentioned in the same breath as The Lord of the Rings or His Dark Materials for generations to come.