Back in the day....
Way back when, when mountain bikes were the "new" thing, bikes with 24" wheels were about as common as 26" wheels. And my first mountain bike was of this category (the 24"-wheeled category). I still ride my 24"-wheeled bike, but mostly as a commuter. I'm now on an XXSmall Racer-X with 26" wheels. (I'm 5'1", so I'm a bit shorter than your wife).
Some observations on my 24" experience:
(1) Putting on a smaller wheel will lower the BB -- especially if the bike was originally designed for 26" wheels. This can be an issue, especially on FS bikes where the manufacturers many times lower the BB on small frames just to get the suspension to fit. (Some DHers do like this lower center of gravity, but I find that it can be hard to clear rocky bits if your BB is too low.)
(2) Not only is the tire selection less abundant; but so are all other wheel parts. The last time I had one of my 24" wheels rebuilt, we had to use a mix of mtb and bmx parts. (I kept my mtb hub, bought a bmx rim, and had the spokes custom cut to fit.) This was a while ago, when there weren't too many kids bikes, so 24" wheels weren't as pouplar as they are now. But anyway, rebuilding that wheel was a bit more of a hassle. Also regarding tire selection: I'm now running bmx tires on the 24" wheels -- and they are perfect for the commuting that I do! They hook up OK enough on dirt, but wouldn't be my first choice if I was riding more mtb vs commuting.
(3) It can even be a challenge to buy tubes! Basically the exchange is something like:
"I'd like some 24" Shraeder Valve tubes, please." They hand me some 26" tube.
"No, I'd like 24's"
Then I get the stupid-female-doesn't-really-know-what-she-wants-treatment
"No, ma'am, you want the 26" tubes."
"Um, who's the customer here? I want the 24" tubes, that's the size wheels that are on my bike, so please sell me the 24" tubes."
"Um, OK, but keep the receipt, in case you need to return them" snicker, snicker
(4) I do think that smaller bikes look much more proportional with the smaller wheels. My two bikes are so different in so many ways that I can't really compare the handling difference with just the wheel size, but looking more proportional might mean that they are more easy to control, perhaps. My 26" wheels are so big in proportion to my XXSmall Racer-X that people frequently ask if I'm running 29" wheels....um, nope, it's just 26" wheels on a really small bike.
Finally, there are some good quality bikes of all sorts out there for the vertically challenged rider. The only thing that I can't seem to find that would fit someone of my height would be something like a big hit bike. Other than that, there really are lots of nice smaller frames, that run with standard 26" wheels. Because things like standover figure in a lot more when you have short legs, I think that test riding a bunch of models is the best bet for finding something that would work.
