It didn't strike me as particularly noxious...
Is this true?
Jews as a chosen peopleChosenness as superiorityIn early medieval Europe, during a time of intense persecution of Jews, the idea developed that chosenness meant that God loves Jews more than other human beings, or that Jews were in some way inherently superior to non-Jews. This philosophy was first widely taught by Yehuda Halevi in his Kuzari.
A mystical version of this idea exists in parts of the Zohar, one of the primary works of Kabbalah, esoteric Jewish mysticism. The Zohar comments on the Biblical verse which states "Let the waters teem with swarms of creatures that have a living soul" as follows: "The verse 'creatures that have a living soul,' pertains to the Jews, for they are the sons of God, and from God come their holy souls....And the souls of the other nations, from where do they come? Rabbi Elazar says that they have souls from the impure left side, and therefore they are all impure, defiling anyone who comes near them." (Zohar commentary on Genesis)
The Raya Mehemna, a somewhat later work printed with the Zohar, has a similar view. One section states: "Israel merited that God called them 'men,' as it is written 'But you My flock, the flock of My pasture, you are men,' 'If any man of you brings an offering.' Why are they called 'men'? For it is written 'And you who cling to the Lord your God'. This means you and not the other nations, and because of this 'you are men', you are called men..." (Raya Mehemna, commentary on Torah portion Yitro, page 86a)
This view was accepted by the founder of the Lubavitch Hasidic dynasty, Shneur Zalman of Liady, in his Tanya. A section in this book holds that non-Jewish souls come from unclean kelipot (left-over shells of the universe's creation), while Jewish souls are of a higher character. (Tanya, Likkutay Amarim I, 5-11 and 6a). This book is accepted as authoritative by all Lubavitch Jews. Some rabbis, including Adin Steinsaltz, downplay or significantly reinterpret this passage. <1>
Extensive Wiki Article on this specific set of presumptions
I never got too choked up about this, because...well...Jewish people used to believe elements of this themselves. The rationale offered is that usually that such ideas usually give rise in the psychology of the Oppressed. American slaves tended to adapt elements of the Christian Bible that put themselves in the position of slaves and the Chosen people...
But you really should have just told them that...some obscure sects still follow this crap, but this is not modern Judeaism and is not accepted by either Orthodox, Conservative or Reform branches. The same as the Catholic Church...they used to think witches wouldn't burn. But Catholics don't believe that anymore. Do they?
You might want to do the reverse and mention that would, they as Catholics, only want to known simply through what Matthew Fox writes or the Opus Dei think?
Don't discount everything as racist -- take it as an opportunity to inform. They sound stupid and might appreciate the information and pass it along the next time they hear some idiot say this.