Well, it could be that in this fanfiction, Naruto has some sort of hidden agenda. He might call Sakura ugly as a form of reverse psychology. He could be thinking that by doing so, she'll prove him wrong and become more confident. Or perhaps there's some miscommunication or misunderstanding between them. For example, Naruto misheard someone talking about Sakura in a negative way regarding her looks and he wrongly believes it, so he says she's ugly.
He could also get angry. After all, being misjudged like that is unfair. His anger could lead him to either lash out verbally at Sakura or he could leave the village in a fit of rage, feeling that he is not accepted even by his friends. This could then lead to a series of events where Naruto has to find his own way and Sakura realizes her mistake later on.
One possible reason could be Naruto's out - of - control power. If in the fanfiction Naruto has some new and extremely powerful abilities that he can't fully manage, Sakura might see him as a monster out of fear. For example, if he accidentally causes destruction while trying to save the village.
It might also cause Naruto to lose control more easily. If he hears such a hurtful term from someone he cares about like Sakura, it could make him more vulnerable to the Nine - Tails' influence. In the long run, it could be a turning point in his character development, either making him more bitter or more determined to show everyone, including Sakura, that he's not what she says.
Well, it could strain their relationship a great deal. Sakura might feel hurt and become more distant from Naruto. She could also try to prove herself to him, which might lead to some interesting character development for her.
Sakura could prove them wrong by showing her medical skills. In many Naruto scenarios, her ability to heal the injured is crucial. For example, she was able to keep many ninjas alive during battles. Also, she has been training hard in combat. She might challenge one of the members of Team 7 to a spar and show her newfound strength and skills.
Well, in addition to Kakashi and Sakura, there might be other characters making brief appearances. For instance, Naruto could pop in for a short visit while Kakashi is there. Or maybe Tsunade could be mentioned, as Sakura's mentor, in relation to her current situation that led to Kakashi's house call. But at its core, it's about Kakashi and Sakura and their interaction.
Perhaps it's a more light - hearted story. Kakashi makes house calls not for any serious reason but just to have a friendly chat with Sakura. They could end up sharing stories about their training, their friends, or their dreams. It could be a way for them to bond outside of the normal ninja - related activities.
He might be really hurt. Naruto has always been an outcast and being called a demon again could reopen old wounds. So he could just stand there in shock and disbelief, his eyes wide with pain.