The first thing you need to do is write her a cease and desist letter. If you know an attorney, place a cc to the address of the attorney. Even if you don't know one, place one anyway (ie:
MarkWaldron@WaldronLaw.com). The only thing it will do is bounce back to you.
Tell her she has 24 hours to remove it. After that legal action will begin. Don't say anything other than to identify the image and tell her something like this:
I have previously contacted you regarding your use of my photo of my animal in an attempt to sell yours. This is an illegal attempt to sell something which you do not have. You may have a Yorkie pup, but not this one.
Heeding the advice of my attorney, consider this to be a cease and desist demand. From this date and time, 12:00 midnight, 06/__/08, you will have twenty four (24) hours in which to comply and remove my image from any and all internet advertising where you have fraudulently placed it.
After this time, a lawsuit will be commenced against you. The image will be analyzed by experts. Charges will include (but are not limited to) internet fraud, wire fraud, copyright infringement, false advertising, unfair business practice, and personal damages.
No further requests will be made before commencement of legal action.
I don't know....shrugging my shoulders.....something like that.