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Talk to lawyer.
My opinion is this. Why not just offer them a buyout? She took your money, you put in a lot of time to make the pictures, promote them, etc. Make a price and them let them decide if they want to pay it or not. That way if she really sues, you can show that you tried to be reasonable, too.
However, if you've already licensed the content out to other people, then they have to understand that you can't take back the already sold sets. The buyout would just be to stop you from selling more copies of the sets.
She got paid, so she has nothing to complain about really. But if you can be cool to her and get paid back what you put in plus a little profit, then you both can live happily ever after.
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