Shari, one thing you might do with her is to have her work on reading the comics from the paper and articles from the local paper to you. With books she will be able to rely on memory to get more of the story right. She has likely relied heavily on her memory to get as far as she has. My dad discovered that one of my cousins couldn't read when the cousin was 10. He got passing grades in school and was really smart but had moved several times and changed schools so he missed out on huge chunks of the steps while learning to read. If the paper doesn't interest her, try magazines on topics she likes. There are even magazines for various tv shows and networks. Nickolodeon might be of interest, or zoobooks or discovery kids. Family fun is also another one that might be of some interest.
Her dad needs to work with her also. In addition, stock up on audiobooks. If you can get unabridged ones, have her spend some time listening to the story and following along in the book. The Harry Potter books seem to attract most kids and this is a great way to hook them into reading. I know a LOT of reading teachers who played the audio in class as kids followed along and then most of the kids continued reading on their own after she returned the audio to the library. If HP is something that is a subject matter problem with her mom/gma, there are a lot of audiobooks available. Magic Treehouse might be a little young for her but would likely be of interest to Wee. Even the Narnia books are usually available in the library on audiobook.
Just things I know that have helped some people. even having her read short poems can help. Jack Prelutsky has books of poetry that are very popular with kids.
Also get some MadLibs books. Use them during dinner if nothing else. At first you or husband can write and read them back, then work until seh can do more of that. It will get her interest (we did them during dinner but still each one had some reference to farting or poop or something like that - made the kids laugh like loons every time!), let her see that reading can be fun, AND teach her the parts of a sentence. Use "describing word", action word, etc... for adjective, verb, etc... It makes a BIG difference in learning to read.
Just some ideas.