Oh hun! Then really, it was more than likely in fun! As her sister or SIL... she must have felt the urge for a little teasing.
Ummm.. on the wold/dogs... I don't know I would say that was impossible... I dont actually know that it is or isen't.. but it is proven that dogs did descend from wolves. It would then just be a question of how far apart they drifted.
There is some truth to her claim. I have see rabbits mate with a cat, a chicken (this one is on youtube),a teddy bear, and even shoes. I have never seen a Teddyruxrabbit come out of the pairing. Although that clucking rabbit that lays chocolate eggs makes me wonder.
She might not be pulling your leg or lying... she may believe it. My father very seriously told me recently about how Turkeys will stare up at the rain until they drown. He simply passed on a old tale that he had heard. He wasn't trying to lie or pull my leg, he just had heard this for so long that he assumed it to be true. Probably the case with your aunt.
I wanna Teddyruxrabbit, what do they eat?
I have a Shih tzu that is in the middle of a long term, um, relationship with a stuffed monkey. Too bad he's neutered (the dog - don't know about the monkey...) I could have Shih keys or something. Monk tzus......