If we sense there is a red flag, were asking them to upload additional documents like tax returns w2's etc.

That's just common sense.  

If she held the time for your property and couldn’t take on other jobs, it makes sense to compensate her for that.

It makes sense to try to go in a better neighborhood next time.

It makes sense to run the numbers, but will depend on the appraisal. 

My question is this: How could we structure an arrangement that would make sense for both my potential partner and myself?

And you create a situation where you are totally dependent.For most people in the US OOS investing does not make sense, the economic delta is not large enough to justify the additnal cost and management burden. 

Hope all of that makes sense.

Would it make sense to form this into an ADU or leave it as is?

I agree it makes no sense to hold onto this condo once she passes.