Word question - hard to explain... ?

I think I understand your question. Let me take a stab at it. What your trying to say is that Margaret misses the point completely. She's not MISinterpreting the statement; she simply isn't interpreting it at all. I think you have the right idea in that there is no single word for this. The easiest and most clear way to word this would be to simply attach a negative to the verb "understand". (When Margaret does not understand, she says, "What do you mean by that?")