Agree with the above - no tax disc means she's at risk of having the car crushed in some counties, or a fine in others, but doesn't mean that someone can commit a driving offence against her and get away with it.
The police have effectively implied there's not enough proof to confirm any traffic violation was committed, so it'll just be down to your insurers to fight it out if you have to go down that route and you'll end up just each paying for your own anyway. I had a similar situation with an idiot who came flying down country lanes and took off my wing mirror - all the police could do was get his contact details for me as he didn't stop.
Filler fixes will lessen the resale value of a car, but be otherwise have absolutely no effect when done well - and on a W reg car even the resale value won't be affected too much - you *will* dint/scratch the car again!
PS the edit button works on these forums, and prevents the need for double/triple posts.