The details as to why get fairly complex, but the short answer is that she *may* be able to go larger, at least with some photos.
The detailed explanation is that is really depends on how much information was recorded. Just because the sensor has 12 million pixels doesn't mean that it actually recorded 12 million useful bits of information. Between pixel density and thermal noise, it's harder for smaller cameras to take full advantage of their sensors. Not impossible, just harder. Depending on how your wife's pics were shot, there may be enough useful detail to make bigger prints, there may not. Also, not all types of photos (or art) are entirely dependent upon sharpness, some styles and subjects will lend themselves to low-resolution prints better than others.
I've made excellent 16x20s from 8mp images. On the other hand, I could make a pretty lousy 5x7 with a 20mp image if I screwed up the shot.