Veering back to Steve's original topic ...
Steve, while not discounting the possibility that your wife's hands are extraordinarily small, my impression is that the crux of the matter is not so much the size of the holes or spacing or keys or a different flute, but a lack of patience (and perhaps motivation) with the sometimes difficult work involved for a beginner to adapt to the physical demands of the instrument. No one said it was supposed to be easy. It takes time to learn to feel the holes under the fingers, to gradually stretch the hands and improve flexibility, to get comfortable with piper's grip. This can be a matter of months or a year, not the mere 3 weeks between the time you bought the Sweet cherrywood flute and then put it up for sale. Your wife's resistance to learning high whistle as a step toward the flute is also telling. It has all the classic signs of expecting instant gratification, and just giving up.
Of course, there's no shame in simply not wanting to learn badly enough to do the work. Incredibly, I actually know some wonderful people who have no desire to play the flute!
But I think it pays to be honest with oneself, especially if she may want to try other instruments to discover the one that's right for her, only to find that each one comes with its own set of challenges requiring patience and motivation. The right attitude is always the first, most important skill.
My (admittedly limited) experience with the problem is that hand size is usually not the main issue. The largest hole is only around 12 mm, and can usually be covered with piper's grip by even small hands, unless your fingers are downright skeletal. With the correct pressure and angle, and sometimes hand-care products for suppleness, the fingers will flatten out over time.
Hole spacing can be more of a hard limit. But piper's grip is extraordinarily effective in extending one's reach - to the point that even youngsters are able to play standard sized instruments, and even adults can handle large bansuris, oversized bass whistles, etc. And again, piper's grip may take weeks or months to master. An F whistle (since you mentioned it) should be manageable by any normal adult hand, so that's a good test, and failure there is almost certainly the fault of the player's lack of trying.
It also definitely takes time for the brain to adjust to the feel of open holes under the fingers, and for some brains more time than others; everyone can be different. So willingness and motivation to learn a smaller whistle can be a stepping-stone, with it's own joys. There's nothing wrong with covered-hole flutes on their own terms. But they're not a substitute for open-hole instruments for exploiting the full range of traditional playing.
Finally, and probably needless to say, some hands-on assistance from an experienced simple-system flute player, teacher, or mentor can go a long way, and give your wife the tools she needs to overcome the initial difficulties, whether mental or physical.
All just my perspective, of course. In any case, good luck to both of you!
