Wife's H1 to H4 denied erroneously and PD is current for I485 application. Is it better to apply for MTR or apply for new H4 ?

[GCfromMD]

Hi -

My wife applied for H1 to H4 in the month of May and got an RFE in August. Attorneys responded to RFE in August (they have proof of UPS receipt that USCIS received it) well before due date. On 11/4 we got a denial notice from USCIS citing the reason that they didn't receive the response for RFE. She has a valid I-94 (for H1B) until SEP 2012 and also she stopped working on H1 B after we received initial receipt notice of H4 petition.

As our priority date is current (ofcourse after years of waiting) we will be applying for both of 485's this month.

Considering this scenario what would be my best option

Option1: Motion to reoopen MTR takes any where between 6 to 18 months. Will this delay her GC approval?

Option2: File a new H4 petition. Will this cause any problems with here GC application?

If I go with option 1, what would be her status from the denial notice until the date of filing MTR? Also what would be her status from the filing of MTR until approval? Will filing MTR delay the AOS for her I-485?

If I go with option 2, what would be her status from the denail notice date to the date of re filing? Will this delay her AOS for I-485?

Is it possible to file both MTR and a new H4 petition (basically execute both option 1 and option 2)

Any help is very much appreciated.

Thank you

[GCfromMD]

Additional Details: My attorney will be filing I-485 for both my wife and I (paper work completed) in the next two weeks (week of 11/7 or 11/14). My understanding is that this H4 issue shouldn't stop my attorney from filing I-485 applications for my wife and I. Can you let me know if my understanding is correct?