After driving herself to church on Sunday, the 89-year-old monarch appeared unruffled at the service and drinks party that followed.
"She was like she always is, normal," her cousin, the Hon. Margaret Rhodes, tells PEOPLE.
The Sunday outing came one day after palace officials slammed the publication of still images from a 1933 home video shot at the royal family's Scottish retreat, Balmoral, in which a young Elizabeth can be seen mimicking a Nazi salute at the apparent behest of her uncle (and future king) Edward VIII.
Rhodes, 90, who spent much of her childhood playing with Elizabeth and her sister Margaret, says the film was made in an age before the full horror of the then new German government became known.
"The whole thing is a mountain being made out of a molehill," she says. "It was long before any significance was made to a Nazi salute."
She echoed the sentiment made by a royal source, who told PEOPLE Saturday, "Most people will see these pictures in their proper context and time ... The Queen is around 6 years of age at the time and entirely innocent of attaching any meaning to these gestures."
As Rhodes tells PEOPLE, "To put any sort of slur on the family when they've worked so hard is unnecessarily cruel. If you think back to what the King [George VI] and Queen did during the war, and the present Queen [Elizabeth], it is farcical to think that they would be pro-German."
The Sun, which broke the story Saturday, underscored the historical fact that Edward VIII was a sympathizer of Hitler and his evil regime.
"Everybody knows that the Duke of Windsor was inclined that way, and it shows how grateful we should be that he didn't stay being King," says Rhodes. (Edward abdicated in 1936 following a brief reign after sparking a constitutional crisis by proposing to his divorced American girlfriend, Wallis Simpson. He was succeeded by the Queen's father, Albert, who became King George VI.)
Meanwhile, it has been claimed that the 17-second video clip could have been inadvertently released from the Royal Archives to historians making documentaries, as it appears to be the from the same footage that was used in the Buckingham Palace exhibition last summer, The Daily Telegraph said Monday.
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Palace aides have been working over the weekend to ascertain how the film made its way to the newspaper, and they are reportedly looking into whether there has been a breach of the family's copyright.
Buckingham Palace had no further comment on that and did not add to the statement made Saturday.
"It is disappointing that film, shot eight decades ago and apparently from Her Majesty's personal family archive, has been obtained and exploited in this manner," a palace spokesman said then.
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