I have never heard "go to town" used like this. I think I would had taken it the same way you did. The only thing that would make me think differently is that if this is a movie which accepts calling someone "bitch" it would likely be a movie that would accept using "fuck off." And if that's what they meant, why not say it. Unless it is a new idiom that people are using to mean the same thing.
"Go to town", however, is a rather old idiom meaning something completely different. It is used when you are talking about someone increasing their rate of activity in any situation. If you see someone working a lot harder or faster than he usually works or in comparison to others, you might say, "He is really going to town." It can be in any situation, whether working or playing a sport, even something sedentary if the activity is more extreme than usual.
I agree with Dick's response. Go to town can have the positive meaning of working hard or more vigorously. While it can also be used to indicate annoyance or frustration when someone is persisting in some futile or misguided activity -- and often is used this way -- its use sounds wrong in the context you paint, mostly because the victim walks away.
I could, for example, picture a scene where go to town makes more sense. The victim is sitting at a sidewalk cafe being dogged by this reporter. The poor woman takes a break from sipping her coffee, lets fly with "go to town, bitch," then continues sitting there serenely sipping while the reporter continues rapidly firing questions at her -- or realizes the futility and shuts up (probably not) -- it might make sense.
Maybe there is a direct or indirect censorship issue where the director was not free to drop the f-bomb, but there would be better alternatives in my opinion. It sounds clumsy and wrong to me.
What is the movie?
I just (not very scientifically) Googled the phrase and checked the first dozen or so sites listed, which included Urban Dictionary, and found universal accord with the usage that we all seem to agree on, and nothing that would seem to work in the scene as described. Either there's something more complex or subtle happening in the scene than we can discern from RobertB's description or the phrase is just wrong. Or there's a new meaning of the phrase that no one knows yet!
Here are some stuffs I didn't mention: in 'House of Cards,' halfway into episode 13, Zoe grills Rachel for information to incriminate high power politicos. When Rachel refuses to cooperate, Zoe resorts to blackmail, saying she would print stories about Rachel's past, including her being prostitute plus a bunch of other things. Rachel says "go to town bitch" and walks away. That seems like I don't care if you print away, have a field day, do all you want, like that. That's consistent with what y'all think it is.
RobertB said: That seems like I don't care if you print away, have a field day, do all you want, like that.
Now that you provide some context, I think that's exactly the intended meaning. And I've heard it used that way, but not real frequently. An equivalent expression would be "Go for it, bitch."
Go to town can have the positive meaning of working hard or more vigorously. While it can also be used to indicate annoyance or frustration when someone is persisting in some futile or misguided activity -- and often is used this way.
After hearing Robert's description of the scene, I believe what Glenn said here is exactly how it is used. Really the positive use and the negative use have the same definition. It is to work vigorously at what you're doing, good or bad. The speaker can have different intentions: 1) "Work harder at your good work. Go to town." 2) "Go ahead and pursue your futile activity and learn a lesson the hard way. Go to town." 3) "Do this evil thing you are about to do. I don't care. Go to town." The last one applies to the movie. But in every example the speaker is saying to either start or continue with an activity and work hard.
I hear or read this idiom used like this regularly.
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