She will qualify for the 250,000. exclusion as long as she has owned the home and lived in it as her primary residence for 2 out of the previous 5 years ending on the date of sale.
The capital gain in this case is a little more complicated due to her husband's death.
First you must compute her tax basis in the home.
You start with 100% of the Original cost in 1968.
You add 100% of any major improvements between 1968 and her husband's date of death.
Once you have that total, that gets you to her husband date of death.
You take 50% of that total and substitute 50% of the fair market value of the property at her husband's date of death.
So, now you have 50% of the fair market value at his date of death + 50% of the original cost + improvements up to his date of death (which represents her 1/2 of the property).
Then that total goes forward and you add any major improvements from her husband's date of death through the date of sale.
That's the tax basis of the property that will be used to compute the capital gain or loss.
If you can estimate the net sales price (after any real estate commission & closing costs, you compare that to the tax basis you computed and you have your gross capital gain.
The mortgages have no bearing on the tax basis of the home; if there was a refinancing to finance and addition or improvements to the home that may assist you in determining what was spent on the addition, but other than that, paying off the mortgage or an outstanding balance doesn't enter into the computation of the gain or loss.