Thanks for bringing your question to JustAnswer.
Linda is very fortunate to have such a devoted family. I'm glad to hear you are all on the same page, and that there is no divisiveness in the family. You will need to support each other through this difficult period.
It makes me mad that the mental health professionals did not listen to you who know Linda best. Would it be possible to have her evaluated by someone else for a second opinion? If so, putting together a list of the irrational behaviors she's exhibiting can help the new person understand just what is going on. She sounds as if she needs a medication adjustment, at the least.
If that isn't possible, getting her an apartment in an assisted living facility or a place in a group home for adults may be an option. Being on disability makes her eligible for these services, in most areas. A group home will have the advantage of staff on the premises, meals cooked for her, and medications given at the correct times. They will also be in a position to have her hospitalized if her condition deteriorates further.
If this is not possible, check with your local county mental health department, and see if there are ACTT services available. (Assertive Community Treatment Team). This will be a team of MH professionals who are trained to deal with SPMI (Severely and Persistently Mentally ill) clients. They will visit her in the home to check on her safety, provide a 24 hour a day crisis response, and can get her involved in some on-going outpatient treatment, like a day program. If you get her an apartment, it would be wise to also involve an ACTT team or a Community Support Team (similar services as ACTT, but less hours per week).
A day program is less intense than partial hospitalization, but gives the person structure for her day, and they can attend indefinitely. (You can also get information about day programs from the county MH department). Some areas of the country even supply transportation to and from the day program.
Lastly, I don't see any benefit at present for involving her biological mother since they don't have a close relationship.
I hope that this has given you some ideas of the services available for the chronically mentally ill. Please ask if you need more information, or click on ACCEPT if this has been helpful.
I wish you well as you deal with this difficult situation!