Of course she was blessed by Grace. How wonderful that now we all are! Elizabeth was letting Mary know that since she was picked by God, she was in fact "blessed." This is a great forshadowing of our being blessed, in accepting Christ as our redeemer. As far as saying the Mother of God, it is true, she was tasked with bearing our Lord into the world. We must be careful to remember the context of Elizabeths prayer statement, she was exhaulting the coming of Jesus into the world, and exhaulting the fact Mary was chosen by the Lord to bring make the Word flesh.