The Return on Equity (ROE) has gone from really great to what I consider normal over the last 10 years as values have skyrocketed, rent hasn't kept up at the same pace, and loans have been paid down.  

I deal with this all the time it is normal business in California. 

I"m NOT a CPA but I do know the following.If she takes the money out of a qualifies plan, she will likely get taxed at a 10% penalty plus whatever her normal earned earned income tax rate is, assuming she does not have another way of offsetting that, like being a real estate professional.If she invests with you using an SDIRA, she will pay no tax for putting the money in your deal, but if you use leverage, will likely pay UBIT taxes.

Trying to figure out what the normal course of action for something like this is, since at this point we don't know the owner of the other building.

Costs are normal, including appraisals, standard fees, and escrow account set-ups.

Do you know that it is almost impossible to make Profits with SFH's under normal circumstances?

I've filled this form out a dozen times as a normal sale but the form doesn't have any options for self-directed IRA sales so I need to find a CPA who is familiar with this.

The moratorium hopefully ends this month and we will get back to "normal?" 

Normally as @Craig Yarnell said you finance one way to purchase the property and then after a period of "Seasoning" you refinance to get most or all of your money out. 

However, I’ve owned about 10 hundred year old properties and not had too many issues other than normal wear and tear.