Correct, he’s blatantly taking the absolute piss out of her and mocking her yet she’s clueless and too thick to realise and thinks he’s trying to be funny.She's too thick to see that as him taking the piss out of her, she'll just think thats him trying to be funny, utterly unaware that its yet another display of his absolute disdain for her.
How she even still kept the clip of Alfie saying he was happy, scared and sad, but couldn’t explain why he was sad, in the video I don’t know. She really doesn’t see what others do, does she. She’s absolutely oblivious to anything going on around her.