So basically if she tries to enter Canada and immigration doesn't stop her, and she stays in Canada for 2 years without leaving, she can renew her social insurance card
Not the SIN card, she doesn't have to renew that. Just the PR card.
What happens if they do catch her at the Canadian border?
They would tell her that they think she has not been living in Canada enough to keep her PR status. I believe they are supposed to let her in for 30 days to give her a chance to prove them wrong. If she can not prove that she meets the residency requirements, she can apply on H&C grounds
How does Canadian immigration catch her anyway? When I enter Canada at the Toronto airport, I don't see them scanning anything, and sometimes they don't even stamp the date of entry in the passport. And when I leave (I usually depart via a US-bound flight) I don't even see any Canadian immigration officials, only U.S. ones and once again there is no passport stamp of the date of departure.
Can she appeal for an extension on C&H grounds if she is denied?
I don't know how they catch people but sometimes they do. They don't check you when you leave but the US checks you when you come in, don't they? I have heard that Canada shares info with the US border. When I was a PR, usually when I was coming back to Canada after a trip they'd scan my PR card and passport.
If she applies on H&C grounds, I don't think she'd have much of a chance really. She has parents and siblings in Canada but not kids or a husband. She decided to lose her PR because of a job. Hardly a compelling reason to feel sorry for her to let her keep it. If she had to stay in old country due to a seriously ill parent or something like that, now that would be H&C grounds.