If she has not claimed to be a US citizen to work, to claim any benefit, or to conduct any business, then she's probably fine. She may get grilled a bit in the interview considering she overstayed for 2 years but ultimately that wound't be the reason for them to deny her AOS application. If she has no criminal records, her overstay and illegal employment should be forgiven as a spouse to a USC.
Just be honest on the forms, don't lie about whether or not she has worked, especially if she has filed tax within the States before. Double check to see what she has claimed on the tax forms.
Hope it goes well for you.
And for all those people who are questioning how she overstayed in the States without a valid working permit. Well, not all employers ask employees to fill in I-9 forms/some jobs are paid with cash, like being a nanny, an event staff, a cleaning lady, etc./She may have financial support from her home country like international students do/.
Whatever her case is, the OP didn't ask for a detective. He simply asked for suggestions. Let's keep the good tradition of VJ, being helpful and honest but not judgmental.
