I gather she had some kind of non-compete clause in her contract, and the publisher is insisting that means "you may not publish anything else, no matter how different, in any place we don't approve of."
We don't know enough of the details of her contract (and I don't expect her to provide them) to know how specific that non-compete clause is, or whether it would reasonably apply to a self-published book of previously-published short stories.
Option clauses are a mess--they're part of the whole "you write; we do everything else; eventually you get money" attitude that publishers try to pull off.