I want to maximize liability protection while reducing all the multiple filings.

Although she may feel entitled to "more" because she has owned her portion longer, her length of ownership doesn't somehow grow her interest in the property (and thereby reduce yours?!).  

She had hoped to file an Offer in Compromise to reduce the amount but since she has her house as an asset to cover the $40,000, it would seem that isn't a viable option from most attorneys she spoke to.

You must reduce the basis of property by the depreciation allowed or allowable, whichever is greater.

If the taxpayer used the property as a rental or vacation home prior to using it as his or her personal residence, then the amount of gain that can be excluded will be reduced for that period of “non-qualified use” (see IRC Sec. 121(b)(5).)

Of course the lenders that want less will probably charge more.You could also look for partners, reducing the amount of initial capital you'd need, and once you've proven yourself you can probably find investors or silent partners that allow you to put nothing in. 

Here is an example, ripped of from one of Ben Leybovich's articles:https://www.biggerpockets.com/renewsblog/wp-content/uploads/2015/03/CapEx_Aricle_TABLE_1.pngAlso, another false statement I see on BP all the time is that because it is newly remodeled, an investor should be able to eliminate or reduce the CapEx expenses... this one is actively sold by the turnkey companies as is the % of rent CapEx falsehood, if they even talk about CapEx at all. 

There is no logic in putting more money in a rental than you absolutely have to as it only reduces your ROI and cash flow.

It is also true that if I forced appreciation, increased rents and reduced expenses there would be even more %.  

Should I take the RSU vestment and put that totally towards the down payment on another SFH, should I use that to reduce the principal on the rental or should I refinance the house (estimated value at $171k) and use the cash to finance another venture.