Seeing as the decision maker has used policy, not legislation, that is a terrible decision IMO.
It's only been 2 years since her last visa.
I don't think the decision is appealable, so your only option is to apply again for another type.
You will be her sponsor so your wife not being in fulltime employment should not be a deal breaker. Plenty of people are granted visas without full time employment.
Just add as much as you can to the application.
You sponsoring the holiday, the length of your relationship, visit aging mother, reasons to retuen etc.
I feel your pain.
I'd be pissed off as well if that was me.