I don't get any of this? Why would she give up any of her copyright, if she pays for the demo? Then it's a work for hire.

If she's capable of humming the lyric, she can have a pro studio help arrange harmony(chords) for that as a work-for-hire, for less than 100$.

So basically she can have a pro guitar/voc demo done for about 250$, if she sends a studio a recording with her humming. AND she'll keep ALL her rights, and don't get the hassle..

If not, she's better off with a slap to her face IMO

In terms of the contract rewrite, it's not clear to me if she agrees to give just publishing away (which is common), or the actual mechanical royalties (which is a no-no, unless they really are cowriting the song)..?