There are several things you can do to raise the handlebars on your wife's bike. However, it sounds like it was built up with steerer tube cut short, which could complicate issues. First, install a riser stem with a shorter reach. If that doesn't help enough, you can get a head tube extender.
http://www.nashbar.com/profile.cfm?c...All%20Products
The most expensive option would be a new fork with a longer, uncut steerer tube.