She's going through CreateSpace. The placeholder cover she's using is a piece of royalty-free art that CreateSpace offer their authors. It's considered really tacky to use those generated covers rather than create your own, which is what I'm assuming she means by "it'll be available when the illustrations are ready." She may be hoping for at least a couple of sales to cover the illustrator costs, at which time she'll change the cover--and I guess the people who bought the first version are SOL, because I doubt she offers refunds.
CreateSpace pricing is kinda complicated and I've personally never printed through them, but from the little I know of the system, you can set your price as literally anything. CreateSpace takes a percentage of the list price for distribution (40% standard, but up to 60% for their widest distribution) and may charge a per-page fee for longer books (which sounds like highway robbery but actually works out to a fraction of a penny per page).
Upshot is that publishing a 292-page work through CreateSpace and opting for the widest distribution, there's a certain point above which you have to set your price or else you'd actually end up owing money per sale--but even then, you can set your book for a pretty reasonable price ($11-12) and come out okay. You'd end up making only five cents a book, but at the end of the day, you don't owe anyone anything. (and if you don't opt for wide distribution, you'd end up with about $5 pure profit per sale). No one's getting rich doing this, but it's not a scam. Technically it's not even a vanity press, although it's probably only a few steps above it.
What it sounds like is that she's got her heart set on making the full list-price as a royalty. In other words, WoggleBitch wants $15 per book, and she will make $15 per book, no matter how it has to happen. So she set the price ridiculously high in order to compensate for that because she doesn't understand how royalties work or why someone gets paid before she does.
