Jesus and the Canaanite Woman
Here's the first question to ask of this difficult story: what is Matthew trying to tell us? The Gospels are not an exhaustive transcript of the events of the life of Jesus. Rather, they have been arranged selectively to make a theological point. For example, here is how John explicitly explains the purpose behind his Gospel:
Jesus performed many other signs in the presence of his disciples, which are not recorded in this book. But these are written that you may believe that Jesus is the Messiah, the Son of God, and that by believing you may have life in his name.... If every one of [the things Jesus did] were written down, I suppose that even the whole world would not have room for the books that would be written.
John 20:30-21, 21:25
Although Matthew doesn't have a statement of purpose as explicit as John, his point is fairly obvious: he wants us to believe in Jesus. So, the only reason to include the strange story of Jesus and the Canaanite woman must be because Matthew thinks it teaches us something important.
Context, Context, Context
Where does the story take place? Not in Israel proper, but in "the region of Tyre and Sidon." These are cities of Israel's traditional enemies, and to make sure we don't miss the point, Matthew makes it clear that it is a "Canaanite" woman who is pestering Jesus. The Canaanites were the violent idol-worshippers the Children of Israel fought when they entered the Promised Land. In other words, she is DEFINITELY NOT an Israelite.
This story takes place immediately after Jesus has had an argument with the Pharisees about what real faithfulness looks like. The Pharisees DEFINITELY ARE Israelites, but their hard-heartedness ultimately leads them to reject and crucify Jesus.
Contrast the Pharisees dismissal of Jesus with the Canaanite woman's persistent pursuit of Jesus. The chosen people REJECT the Messiah, whereas the Gentiles are eager to receive him.
"To the Jew First, then to the Greek"
Since Genesis 12, hundreds and hundreds and hundreds of years before the time of Jesus, the Lord's plan has been clear: to use the family of Abraham as the means by which he would save the entire world. The Apostle Paul explains this plan in Romans 1:16:
For I am not ashamed of the gospel, because it is the power of God that brings salvation to everyone who believes: first to the Jew, then to the Gentile.
Romans 1:16
Jesus is therefore explaining the rescue plan accurately when he says, "“I was sent only to the lost sheep of Israel" (Matthew 15:24). His ministry takes place in Israel, and is directed toward Israelites. But because the Jews reject him as Messiah, the gospel is then taken by Paul and others to the non-Jews, the "Greeks" or Gentiles.
The Jews traditionally viewed the Gentiles as unclean sinners, and no devout Jew would have anything to do with them. The Jews also called the Gentiles "dogs." Jesus is therefore using traditional Jewish ways of referring to Gentiles in this passage. He seems like a jerk, but I think he's setting up the disciples (and by extension, us) with the language he's using.
You Know the Tree by Its Fruit
His language seems harsh, but look at what Jesus does: he heals this pagan woman's daughter. Jesus has been telling us over and over again: you know the tree by its fruit. It's not words that matter, but actions. Though his words might seem harsh at first, he does in fact heal the little girl, just as he has previously healed the Centurion's slave. The ministry of Jesus is to the Jews, but here and with the Centurion there is foreshadowing: soon the gospel will be taken to the ends of the earth.
The Canaanite Woman is a Model for Faith
I think Matthew includes this story because he wants us to see the woman as a model for faith. She is persistent and single-minded: she needs what Jesus has, and she's not going to stop until she gets it.
How can you imitate this unnamed woman today?
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