Not made up, but close. My guess it's a big dose of sensational titling to help drive hits or it was done as a joke.

Here is the title of the original story from the Times News;
"Kingsport woman nabbed during prostitution sting" http://www.timesnews.net/article.php?id=9021178
The times news decided not to make a big story about indiscriminating choices hookers make when they pick a parking lot.

This is the KNS version:
"Kingsport woman arrested for prostitution at funeral home" http://www.knoxnews.com/news/2010/mar/08/kingsport-woman-arrested-prosti...

From the article: "Police arrested a Kingsport woman during a prostitution sting at a Kingsport funeral home over the weekend."

Not a prostitution sting at the funeral home, not at the funeral home (this part seems blatantly misleading) - but in the parking lot of a funeral home.

Somebody sees a story, thinks it's funny because they too are reading it wrong, and decides to make an even more skewed headline either as a joke or to drive hits. Either way, it's not news.