You have my sympathy, Robin. We've been through similar with FIL and a number of my friends are having to deal with the same problem.
Bloss's example is excellent, it makes them face reality. The only other thing I'd say is to get looking at homes ASAP, even if she doesn't go in straightaway. They vary amazingly, plus you might prefer to go on a waiting list for a really good one, rather than put her somewhere less suitable immediately. Good luck.