Yes, it means more or less what you guessed: the speaker was given an assignment to do a report on George Washington, but she chose to disregard the "on George Washington" part. She satisfied the "do a report" part of the assignment, but on a completely different subject, namely beavers. "George Washington report" is still the name of the assignment, though, hence the humorously contradictory nature of the sentence in question.
Edit: since this has been migrated to ELL, and based on comments it seems the OP still does not understand the sentence, let me go into more detail.
First, some background: when you're assigned "a report" on a subject, usually, you'll need to do some research on that subject, and then you write down what you found out in a written report.1 Sometimes, "doing a report" will also involve making a presentation, where you stand up in front of the class and -- perhaps with some visual aids -- tell the class2 what you learned.3
Next, the specifics: in this case, this girl was given the assignment of doing a report on George Washington, the United States of America's first president. (Lived 1732-1799.) So, the type of assignment is "report", and the subject of the assignment is "George Washington", which means that the name of the assignment is "George Washington Report". No matter how well or how badly the girl does on the assignment, that's what it's called.
Now, imagine student A. He does a lot of research, pays attention to details, and writes a very good George Washington Report: containing a lot of relevant facts about Washington, presented in an interesting manner, with a proper report structure of intro-exposition-conclusion, well-written with no typos, proper spelling, and good grammar, etc. etc. Also imagine student B, who puts off the report until the very last night, does almost no research, and has no time to proofread. The result is a very bad George Washington Report: badly written, full of factual errors and grammatical mistakes, no structure to speak of, etc.
But no matter how bad student B's George Washington Report is, we can imagine an even worse one: one that's not about George Washington at all, but is instead about beavers. It might be a very good Mammal Report or Science Report, but as a George Washington Report, it sucks. Nevertheless, the assignment was to write a George Washington Report, so beavers or no beavers, that's what this girl's report is.
Why did the girl write about beavers instead of George Washington? That's about as answerable a question as "why did student B procrastinate so much?": we can imagine some answers in each case, like "beavers sounded more interesting" and "time just seemed to slip away", respectively, but ultimately, we don't know, and it doesn't really matter. The end result is that student B's George Washington Report says that "Canadia's frist presidnt was borne in 1799 and died in 1732", and the girl's George Washington Report says that "the beaver is a large semi-aquatic rodent that likes to build dams."
1When a teacher assigns such a report, she usually intends for her students to go to the library and read a variety of books on the subject. What actually happens is that the students look up the subject on Wikipedia and call it good.
2Really the teacher.
3The intent is for you to present the information in an interesting, engaging way. What actually happens is that you go up and read your report while the class yawns and the teacher swears to herself that she will never again assign reports on that subject.
Note that report on does not mean the same thing as do a report on. Report on just means "give information about"; a journalist will report on events, for example. Do a report on, in contrast, means that you did research and put it together into a written document: it implies a format and result that report on does not. In the context of a school assignment, you generally use the latter construction:
I did not do a report on George Washington. Instead, I did a report on beavers.