The 95-year-old Dunne, who met Charles' son Prince Harry when he visited the Sydney Opera House in May, said the heir to the British throne still remembered their first encounter three decades ago in the capital city Canberra.
"I met him 30-odd years ago in Canberra. He said he remembered - and I said, 'so long ago?' He said 'yes'," wheelchair-bound Dunne told the Sydney Morning Herald, adding that she also spoke to Camilla.
Dunne was wearing her first husband Albert Chowne's Victoria Cross, which was awarded to him posthumously following his death in Papua New Guinea in 1945 during World War II.
She was joined by hundreds of excited people who had turned out to see the royals at Martin Place in the heart of Australia's largest city, with many straining to capture photographs of the couple on their mobile phones.
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"We like Camilla too now."
But not everyone in the crowd was enthusiastic about the prospect of continuing formal ties with the British monarchy, a day after recently installed Prime Minister Malcolm Turnbull, a fervent republican, met with Charles.
"I like the royal family, but I don't believe they represent modern Australian values," Sydney high school student Matt Robson told the Australian Broadcasting Corporation.
"Australia is a multicultural society, is more forward-thinking."
A poll published yesterday and commissioned by the Australian Republican Movement found that 51 per cent of citizens preferred an Australian head of state to a King Charles.