As long as she is considered competent they are right. They are really under no obligation to allow her to return the car.
You may want to look into the "Elder Abuse" laws in your State. Most of the time they do cover "financial" issues not just "Physical or Mental Abuse". Since that is a criminal offense just mentioning this to them may make them a little more willing to "unwind" the deal. Your saving grace in this and what may be the biggest factor is the fact that they took her trade and gave her $1.00 for it. Even a 30 year old car with no doors, windows, or seats would have a trade in value of more than that.
but there should be some sort of law stating they can't sell any kind of car to no one over a certain age limit
There is no "law" that needs to be put into place, but perhaps some common sense. This event is going to force you to think about some things you probably don't want to think about. If you claim she was not competent enough to purchase a car because of her age, is she competent enough to drive? If she was not competent enough to understand the deal, perhaps she really does need a Guardian to watch over her?