1. I've never heard of engine fires!
2. I haven't experienced terrible brake wear, my car now has just shy of 18k on it.
3. I think if she was to order a new set of rotors and pads off some place like BATinc (nothin fancy, just the nondrilled/slotted ones, look like OEM but better quality) then the brake issues tend to go away... there are plenty of people running BAT systems that could offer their feedback. I plan to go that route whenever the brakes on mine go.
4. The 2000-01's did tend to have more issues than later models, so I'm not sure if she could afford a 2002? But even if not, make sure all the recalls or TSB's that apply have been done to it, there are some people with 2000's that have never had trouble with their Focus, so they're not all bad.
Good luck with your research and to your sister's hunt for a good vehicle for her and the kiddos.