Is it really that rude to not have my napkin on my lap while I'm eating? ?

i dont think so

You may not realize it, but you're talking about four different issues here, so let's take them all one at a time. (1) Is what you're doing "rude"? Yes. It's against the etiquette of the local culture, and that's what the word "rude" means. If you were dining somewhere else, what you're doing might not be rude. (2) Is what you're doing "bad"? That's a matter of opinion. Certainly it's not the worst thing in the word, but there is something to be said for keeping your spit-soiled napkin out of sight of others. (3) Is what you're doing your choice? Of course it is, but that has no bearing on whether it's rude or not, or bad or not. (4) Is what you're doing your aunt's business? No, but that doesn't mean she's wrong.

If you're at her house, I probably would do it. As she might not want crumbs on the floor.

If it's outside of her house, then it's your choice. However to keep the peace - I think there's no harm just doing it whenever she's there. Annoying, but life is short. It's better not to get into an argument over it.

Grow some balls and tell her to mind her own business.