There are three definitions of cynic, according to the American Heritage Dictionary:-
- A person who believes all people are motivated by selfishness.
- A person whose outlook is scornfully and habitually negative.
- A member of a sect of ancient Greek philosophers who believed virtue to be the only good and self-control to be the only means of
achieving virtue.
Use of the word to mean the third of these is rare nowadays; the speaker of your sentence presumably had the second definition in mind, and you looked up and found the first. The historical note includes the explanation:-
When Cynic first appeared in English in the 1500s, it referred to the
Cynic philosophers, but cynic and cynical were soon applied to anyone
who finds fault in others in a contemptuous or sneering way.
So in this case Judy would be offended by a fantasy as she would be offended by, or affect to be offended by, anything else (finds fault...in a sneering or contemptuous way), and the more pleasant or agreeable the fantasy, the greater the scorn of the cynic.