I've been thinking more about this in the past few days, and I think I have a more thoughtful answer for you (and I'm gonna wrap your question about medals from the hist. forum in with it).
Honestly, concerning the rank I think you're fine with making it, but if it makes you really uncomfortable then just document why you didn't, and perhaps make them to carry to show you *could*. Or greek them so that they show the rank of "Circle Diamond" and explain in the documentation why you did it.
That said, I'm still very curious why your friend said what she did. I think you should talk to her more and find out why she thinks it is insulting or disrespectful. I think explaining your intentions and respect might help to smooth over her feelings that you might make fun of things (the best reason I can come up with, which may be totally wrong).
I also put a little more research into modern military costumes through some costume friends. Impersonating a military officer is a crime, but there has to be "intent to defraud", meaning you present yourself as an officer to gain something you wouldn't gain as a civilian or enlisted. It's really not applicable in this case. Military uniforms on television and film are made as accurate as possible.
As I see it, there are two ways you can go about designing your character to be respectful. Your first choice is to pick a person and make their uniform. It will be easier to research and to justify your choice of rank and which medals to wear since you would be copying what that person earned. If you want to go this way I'd suggest you contact the Women in Military Service Memorial in Washington DC: http://www.womensmemorial.org/
They are a great resource for the experiences and lives of women in the military.
Your second choice would be to make a nebulous person and extrapolate what they would wear. You'd have to figure out where that person would be when in order to figure out what kind of medals and promotions they would receive.
Either way, I'd suggest you not duplicate medals of honor or valor. A group medal awarded for service by a unit or an organization, however, I feel is fair game. You could also look for reproduction medals. Personally, I would not buy original medals. There's just something very personal and special about a person's medals that would make me very uncomfortable wearing them without their express blessing (in which case it would be an incredible honor).
You should also look up a World War II reenactment group for advice. I know they exist, there is a large one that marches at DragonCon every year. They could probably give you better counsel on medals, rank stuff, and any other questions you may have.