Toddler Behavior: When Toddlers Say Too Much
Oftentimes, children say things that are inappropriate, or that we wish they hadn't shared. And yet, your son was doing exactly what you are teaching him to do ... namely, he was telling the truth! If you try to deny his truth, then he will wonder whether he's supposed to tell the truth or not.
I certainly understand your embarrassment and desire not to hurt the woman's feelings. In a case like this, it is necessary to teach not only the importance of telling the truth, but also when using discretion is advisable.
It isn't that children aren't correct when they say things like, "He's really fat," "She has stinky breath," "He walks funny." They are, in fact, speaking the truth (no matter how embarrassing it may be to you!). What you will want to teach your toddler is that some things may be hurtful for others to hear. Teach your son about the things that may hurt someone else's feelings and why. He needs to learn that calling someone fat could be offensive. But be sure to acknowledge that you know he didn't mean to hurt anyone's feelings.
Caution: Please don't have him apologize for telling the truth! (Because you want kids to tell the truth.) Instead, next time this happens, you might try saying to the woman, with your son listening in: "My son didn't mean to hurt your feelings; we are working on telling the truth but keeping some observations to himself."