It's a really nice bike, so I'd definitely repair it if I liked the fit and ride.
Clearly, the current shifters and brakes are not functioning and may be unreliable. Would your wife benefit from lower gearing? The least expensive option would be to repair the shifters and brakes, the next least would be to replace the shifters and brakes with compatible new old stock or used parts. But it might be seriously worth it to upgrade most of the components at this time.
Those Campagnolo wheels should work fine with an 11 speed Campagnolo cassette. If I were upgrading the group set on that bike I would probably get Campagnolo Potenza. Also, 11 speed cog spacing is the same for Campy as Shimano and Sram, so you could use an 11 speed Campagnolo cassette with the 11 speed drivetrain of your choice.
I wouldn't sweat the threaded stem. The difference in weight and stiffness isn't a huge deal for most riders. In a cool move, Velo Orange recently came out with threaded stems with 31.8mm clamps so you can use modern handlebars more elegantly than with a threadless adapter.
What could be significant is the improved comfort of a more current compact handlebar setup—the Soma Hwy 1 bar is good if you want to stick with a 26.0 stem.