I would be backing out of this one quickly. #1, she stated that
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I had the hardest time looking at it like a business because I fell in love with each pup and didn’t want to get rid of them.
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It should NOT be a business. Does that raise any red flags for you?
I would simply tell her that the questionnaire she filled out stated that she was not buying her for breeding purposes. That you do not intend on giving her full registration. This will not stop her from breeding her though. The only way you can ensure that is to have her spayed before she leaves your home.
And no, I would not care what lines the males has. I wouldn't consider this as a way to improve or add a line to my breeding program. Especially under the circumstances.