In this case, who cares about diplomacy...and why should you have to defend yourself and your beliefs? She is the one who tried to push her religion onto you!

Of course you could have. But diplomatic doesn't mean better. Sounds like the softer approach has not worked, and you did what you need to do. This is about you and your feelings. If your acquaintance takes that as an affront, so be it.

Speak softly, but carry a big stick, is something I rather enjoy doing.
I get what you mean though.
I have a lot of friends that are believers. but for the most part we never have any issues about what each other believes.
But yes, I have had some so called friends, that absolutely refuse to stop trying to convert me.
It's succinct to say that most of the latter, are not friends of mine any more.

It is nice when people want to be in your company and share. I think I would have told her that I was not interested in attending anything with a religious theme and suggested something else.

Not knowing the tone of voice or words used it’s not really possible to say if you could have handled it better but I admire your patience putting up with it for years.

I will also say your rejoinder about her not respecting your beliefs was spot on.

For
Some reason the religious expect to receive the respect that they do not offer

After years of her disrespecting you, you did the right thing. Enough is enough.

Why to be "more diplomatic"...or diplomatic at all with a person who doesn't respect you? I would have told her NO the very first time and keep my distance from her 100%.

They will always attempt to blame you because deep down in their ignorance they know they are wrong....and blaming others is their defense

This would be so green eggs and ham but with flies. Flies and mold.