Should I have reported this?

[Fyrebrand]

They insulted the appearance of a character. Not a person. Why should that come with a consequence?

People put thought and time into the appearance of their character, face, hairstyle, glamour, etc. In a way, it is a "creation" of theirs. By saying the character is hideous, you are saying their creation sucks. And unless someone is asking for a critique, there is literally no reason to say something like that to a complete stranger except to get under their skin. It's just antagonistic. Otherwise, why would the person bother saying it at all? And why do you think they said it after the dungeon was complete, and not at the very beginning? They knew it wouldn't go over well, and didn't want to mess up their run.

See here is the difference, by calling them a moron you are insulting the person. A person has feelings. Calling a character ugly should have no impact, they are not real.

Have you ever had someone compliment your character's glam, portrait, etc.? Did you have no reaction whatsoever? Did you just think "This means nothing to me, it is mere ones and zeroes in a computer. I have no connection to this."

But again, it doesn't matter whether you're directing a comment toward the character, or the person behind the screen playing it. The intent is to influence the player's mood either way. Telling someone you like their character is meant to make them happy. Telling them their character is hideous is meant to annoy or upset them. One of these things is a kind gesture that makes the game more fun to play with others. The other is an open provocation meant to illicit a negative response.