A letter of resignation is probably the best thing in the circumstances but I would still say make a visit to your GP to document her condition and the reason for it.

I know, from personal experience, that this type of bully doesn't stop. She will just find the next victim and the one after that.....

If your wife can cope with doing it she would be doing everyone a service by taking legal action against the NT and this woman. Basically, resigning because of the way she has been treated can, I believe, be construed as constructive dismissal - I'm sure if I've got that wrong one of our legal eagles will put me right. Whatever the term, your wife has been forced to resign because the work situation has affected her health to a major degree. Once she's out of the firing line it may not be so difficult to take action against her employers and it could a) give a lot of satisfaction to both of you, and b) may galvanise the NT to do something about this woman.

Hitting them in the pocket is one way of getting their attention!