If she's that small, I'd consider getting a special frame, like a Terry. I don't think you're going to gain that much going from 700c to 650c.
Just looked it up, 700c is 622 mm, 650c is 571mm. Figure that your dropping the bike half of the difference (51 mm), which works out to a 25.5 mm drop in height. Which, for the metric impaired like myself is.... 1 inch. Not worth it, especially considering the rarity of tires and tubes. And rims.