My daughter was like that too but then she just grew out of it. I think some of that kind of behavior is just developmental - don't focus too much attention on it and it will disappear on its own.

It's really awful to have a child hurt other people's feelings right in front of you! My son is like that. I found that reprimands did nothing at all to change his behavior but punishment really worked. I explained to him that he needs to think before he speaks and he needs to guess whether his words will make his friend feel happy, sad or mad. We did a lot of role playing for a couple of weeks and then I gave him lots of practice opportunities for a month. After the month I told him that when he says things that will make others feel bad, there will be a negative consequence. He caught on very quickly (after loosing some treats and privileges). He really doesn't do this anymore.

Have you tried reinforcing "kind" and "nice" behavior on her part? Sometimes kids and parents get into a negative cycle where the child behaves badly, the parent criticizes and the child behaves badly some more and the parent criticizes some more and so on. If you break out of the cycle the child's behavior might improve. Just ignore her mean behavior and give her compliments when she is doing something (anything!) normal or nice. You can even give her privileges or treats for being such a "sweetie." This might work better.

Your suggestion is like Sarah Chana's CLeaR Method - which you could also try. I helped my 4 year old become much kinder using that technique whereas my previous reprimands got me nowhere.