Any compact camera in the $150-300 range will make good photos in good light. I look for two features: a reasonably wide lens, and optical image stabilization. In any case she'll likely be shooting with a flash indoors.
In the higher price range, up to $500, you get slightly more manual control and possibly a fast lens, at least at the wide end. Something in the f/2 or f/2.8 range might let her shoot available light.
None of the current compact cameras under $500 will do particularly well in poor indoor light (the new large-sensor compacts are all more expensive for now.) She could pick up a used Micro 4/3 body and a 20/1.7, which is capable of excellent low-light shooting, and may be available in the sub-$500 range. I've used my GF1 and the 20mm to shoot in a hospital (and a couple of funeral homes) and got surprisingly good results.