At 8' away from a 42", her eyes, or for that matter the eyes of anyone with 20/20 vision, will not be able to tell the difference between 720p and 1080p. This isn't opinion, it's biological fact.
http://www.carltonbale.com/2006/11/1080p-does-matter/
For that matter, she'll have a hard time, though not impossible, distinguishing between blu-ray video quality and upscaled DVD. And on the audio side of things, the same can be said for Dolby TrueHD vs Dolby Digital, at least through the Bose Speakers.
I'm sure with the marketing onslaught, she no doubt wants blu-ray. The question is, is it the best use of her money, or will she see/hear more improvement by spending that money elsewhere?
I'd suggest bumping up to a 50" 720p plasma. I just bought my parents a Samsung PN50A450 for under $1000 and couldn't be happier with it. Panasonic TH-50PX80U can regularly be had on sale from Sears and Best Buy for about $900 (I have one still in the box, but am waiting on a mount and some cables from monoprice.com before I open it up, so I can't yet comment on the quality of the Panasonic).
At 8', She'll be sitting just a touch closer than optimum for 720/50", but that's miles better than sitting too far away for 1080/42".
As for blu-ray, even if she intends to use the player for years, up to the point when she buys a bigger TV (or sits closer to the one she has), the spec and feature implementation is changing too often to consider any player out there (short of the infinitely upgradable PS3) future proof. I'd take that same $270 and buy a $150 Oppo upscaling DVD player and 3 new speakers for your LCR (Refurbed Infinity Beta 20s are going for about $50 each on a good day on ebay).
If she insists on Blu-ray, buy the least expensive name-brand you can find, or buy a PS3.
I'd still stick with the 606 unless she has definite plans to upgrade the speakers. Otherwise, it's lipstick on a pig, so to speak.