I went with Ubuntu 10.04 -- as their latest LTS release, it should (in theory at least) be a little more stable, which ought to give a better impression for a first-time Linux user. Just got done installing it a little while ago; it is set up to dual-boot with her existing Windows XP installation.
All of her hardware was supported out-of-the-box. This included her WiFi adapter (I never got around to running Ethernet up to the second floor so she connects to the home LAN via wireless), and her Wacom Bamboo pen tablet (this one impressed me; we'd previously had a fair bit of trouble getting it to work smoothly in Windows). Getting the printer driver set up for the Epson multifunction that is shared off of my wife's PC was also a piece of cake. 2D video was working fine out-of-the-box, but I went ahead and installed the proprietary drivers for her nVidia GPU to ensure full OpenGL support.
I showed her Synaptic, and told her to check Synaptic first whenever she wants to install something, before attempting to download packages off the Internet. I also mentioned that I had pointed it at the local Ubuntu mirror I maintain on the file server in our crawlspace (so software downloads through Synaptic would be very fast); after taking a few minutes to explain to her exactly what that meant, she rolled her eyes and said, "Only in this family!"
I walked her through installing Gimp and Inkscape (that was the point at which we had our "Holy crap, the Wacom tablet just works!" moment).
We're still trying to figure out what she'll be happiest with as a music player app. Her fave on the Windows side (MediaMonkey) isn't available for Linux. I think we're going to give Amarok a go, with Audacious as a fallback option.
We'll see how it goes. It is certainly possible that she'll end up going back to Windows, but I think I may have a Linux convert on my hands!

