I pretty much agree with what has been said but I am trying to be a more active contributor here and I have a few ideas I have been thinking about for a while.
To me it seems a good portion of women out there probably think that the man they first had sex with had the biggest cock they have ever experienced. This stands to good reason given that logically they are inexperienced and having never seen one before, so anything is going to look big without a reference point. Then add to this the effect of time and memory and for some women the first will be their biggest even when not deserving (I would have no way of putting a percentage to qualify how many do think their first is the biggest they've had). This is just something I have picked up along the way from girlfriends, the general media and sites like this.
An example; I was reading a womens magazine of my girlfriends. It took 3 women from one guys sexual history. The guy himself thought he had a big dick. The first agreed (they were virgins), the second could not remember and the third his current girlfriend said she knew he thought he had a big dick but in fact he was average.
Most women I feel are not very good judges of size in general, this is always going to sound like a mildly sexist comment but it is generally understood that they are less spatially aware than men.
Also I think while many women understand how the size of our best friends is important to us, I do not think they realise how this really does effect us/some guys when comments are made. I have never understood and luckily never had to experience any woman that said some size related comment in order to play mind games or as often eluded to keep her guy actively trying to please her more (come on??). Then there really are just nasty women out there too.
Breast size has never been important to me and I feel that it really doesn't stop women getting laid/ into a relationship if they want to. I would never want a girl of mine to get a boob job done. However I do feel it is a much simpler procedure with much better results and so if that woman has a real psychological problem with her size it really can be mush easier sort out than say cock size (the risk to benefit ratio is much better for an operation in some cases).
In this case perhaps that guy did have a bigger than average one. 12" is unlikely as we statistically now (more thank just unlikely). In my opinion from I have read most women are not that big down
http://humrep.oxfordjournals.org/cgi/content/full/21/6/1618#SEC3, just one example. If this girl says she could fit all "12" inches in her she probably is judging the length a little wrongly in my opinion. She may just be making a sili throw away comment like we all do "thats a f@*King huge hot dog" when in reality its two inches longer than the norm (stupid example I know). This comment may just be meant entirely in inonence without any venom attached.
As I get older (I am only mid twenties), I find my self mellowing out. I think younger guys probably have a harder time with this subject but its natural, we all compare and learn.
Hope my comments and random thoughts are worth something. They are intended to be entirely non offensive and sincere.
Peace to all,
Matt