Thanks all.
To make short story long...
Visa app was overnighted on Monday 4/6, arriving today 4/7. Got email from NY at 1:30pm ET saying it arrived "safely".
I didn't know about the "if you don't have the sponsor's passport, send the birth certificate" rule. The reason I didn't wait is we didn't have any indication on how much longer it would be and we weren't getting any response from the UK Embassy in DC even though we paid the $3 per minute to phone in an enquiry.
Her passport was issued by UK Embassy in Tokyo in 1999 and they didn't add a barcode, so DC Embassy had to contact Tokyo Embassy to "authenticate" (?) it. Tokyo did not respond in a timely fashion apparently.
We sent the passport renewal off in early February, expecting it back within 30 days. When it did not show after 60 days it started to jeopardize my visa application (I already did biometrics and bought flights -- stupid in retrospect. Hindsight...). We tried to get a photocopy of her old passport notarized, but of course that can't be done without the original. Our local bank indicated they don't notarize government documents anyway. New one on me.
So... I guess I'll be sending off the new passport to NY Consulate tomorrow with CLEAR message that the passport goes with my visa application packet.
thanks