Name calling, lack of respect

So DD's new thing is calling us names. Ok, it's only 'stupid', but still, she knows it's not nice to call people that way and she gets defiant and doesn't care for any punishment she gets for that...
 
How do you deal with it? I'm a bit at a loss but I really don't want her to think it's ok to do those things. I'm mostly ignoring so far but that doesn't really solve the issue...

 

Ignore, so all the "fun" is gone for her.

 

I usually acknowledge the feeling behind the name calling. "Wow. It sounds like you're really mad at me because I said you couldn't..." Or "It sounds like you're really frustrated because you can't..." Later, when we're both calm and feeling connected, I'll remind them of the rule ("In our house, things can be stupid, but people aren't. I like it when you tell me how you're feeling but it's not okay to call me stupid when you're angry."). And then move on with our day.

 

Timothy went through a phase where he just wouldn't say anything nice to his sister.  It was all disrespectful and rude.  Once we were clear that he was just doing it to be obnoxious, we started charging him $.25 an insult.  It was by far the most effective thing we've come up with.  Our kids have to earn their own money with chores and helping out.  After Timothy lost about $2-3 in insults he decided that he should be nicer to his sister.  Once Timothy consistently got the reaction of "that was rude, go get a quarter", he demonstrated that he knew exactly how to behave.  
 
That was probably in 1st grade.  He's in 5th now and we haven't had to repeat that.  Even now when he gets a little mouthy we just ask him if he'd like to start paying $1 a time to be rude.  He immediately straightens up because he knows we mean it.
 
Marissa