UK Immigration Law
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Yeah, they are likely to say that. They cannot actually refuse on the basis of those time limits because it's an infringement of Article 12 of the HRA 1998 - this was proved in a case called Baiai.
You should still apply for the COA, if it does come in time then you should get married straight away then apply as previously stated.
If they still have her passport when her visa expires then technically she will be classed as an overstayer, however the fact that they hold her passport will mean that there are exceptional circumstances which will enable her to raise this as a defence to any future rejection of another application on the grounds of her period of overstay.
I hope this clarifies.