Yes. Probably not.
Law Offices of J Thomas Smith J.D., Ph.D 11500 Northwest Freeway, Suite 280 Houston, TX 77092 713-LAWYER-2 www.MyImmigrationLawyer.info NOTE: Responses are for the education of the community at large and is not intended to be "legal advice." No attorney-client relationship is established by responses or comments.
Your wife triggered the unlawful presence bar when she overstayed her first period of admission by over a year, and then departed. She should have been barred for re-entry for a period of ten years. The fact that she was admitted in 2007 was either a mistake, or because she concealed the amount of time she was in the U.S. previously accumulating unawful presence.
Because it has not been ten years since her 2006 departure, she will need a waiver in connection with her green card application. Getting the waiver approved will depend on whether or not she can successfully demonstrate that you will face an extreme level of hardship if she is denied admission.
On the I-130 Petition, immigration asks if your relative has never been in the States States. You must be truthful. Since immigration allowed her lawful entry (with inspection), her previous immigration violation should have no bearing on this new case. Speak to an experienced immigration lawyer to help you.
Garmo Law Group, PLLC (Michigan) 248-626-0050. This advice is only general in nature and does not constitute an attorney/client relationship. Speak to an experienced attorney before making decisions.