Overall a Small bike should be be fine for someone 5'4". But Bikes can only be so accommodating in the frame. Peoples legs, vs, torso, vs arm length are all different even at the same height. Bike fitment is a bit of an art, one thing to also recognize, is that if your wife is new to MTB/Trail riding, she will want to feel like she can put her feet down when unstable. First questions is for pedaling/standover: is her leg properly extended when she is pedaling? A trick for setting saddle height is to have her knee locked out with her heel on the pedal. this way she will have a slight bend in her knee when pedaling. Lastly, the reach will have her laid out forward, this is good for stability, but can make her back sore until she strengthens her muscles. A solve for this would be to get some riser handlebars and a shorter stem. This can significantly help.
Riser handlebars (38mm):
www.chainreactioncycles.com
Shorter Stem (35mm):
www.chainreactioncycles.com
All this said you could also go and get a professional bike fitting. You need to find a shop, and they will set her up and film her pedaling and make a ton of adjustments including different handlebars, stems, cranks, saddle, seat post etc. Its a bit of an investment ($150-200) plus all the new parts, but might be worth it, if you are not sure where she needs tweaks.
Riser handlebars (38mm):
Nukeproof Neutron V2 Alloy Riser Bar (31.8mm) | Chain Reaction
Buy your Nukeproof Neutron V2 Alloy Riser Bar (31.8mm) from our Handlebars range at CRC. $40.99. Free delivery available.
Nukeproof Neutron AM Stem | Chain Reaction
Buy your Nukeproof Neutron AM Stem from our Stems range at CRC. $40.99. Free delivery available.
All this said you could also go and get a professional bike fitting. You need to find a shop, and they will set her up and film her pedaling and make a ton of adjustments including different handlebars, stems, cranks, saddle, seat post etc. Its a bit of an investment ($150-200) plus all the new parts, but might be worth it, if you are not sure where she needs tweaks.