The song is about her first love. Her fondest memories are of them two playing cowboys and indians. They should have shown the videoclip in the background in Baku to make people understand the context of her wearing that indian headdress.
Here it is. It’s not quite Outkast at the 2004 Grammys, but it’s in the same neighborhood.
Just as bad as Joan herself is the dancers in Pocahontas costumes beating drums. Why are all they dressed as Indians if cowboys are half the equation? Why the slinky costumes? Why aren't any of them men?
This is pure objectification of Indian women that has nothing to do with the song. Joan was already broadcasting home movies showing her playing Indian. How does dressing as a chief on stage with four "Indian maidens" further the song? Answer: It doesn't. It's a spectacle intended to exploit Indians--to take a cute little song and build it up into something impressive.
It's very much like the Australians who wore blackface to emulate the Jacksons. In other words, a minstrel show. In case the song wasn't enough, Joan gave the judges something to gawk at. Look at the sexy Indians dancing with me!
Indian Country Today doesn't think this was quite as bad as the Outkast performance in 2004. But Outkast's singers only looked roughly like Indians in their green go-go outfits. These performers are all clearly dressed as Indians. And Joan is clearly abusing a Plains headdress.
Therefore, I'd say this performance is about as bad as Outkast's. Maybe worse.
For more on the subject, see Jezebel's Guide to Hipster Racism, Andy Samberg in a Headdress, and Heidi Klum in a Headdress.