I want to thank, with my heart, hatrang, visita44, mexicanito, rjessome, torontosunshine, tozo, Jurjen, leo_liu, and oceans_end for your kind help and informative advice.
My wife is reluctant to go back to the Chinese Embassy because last time the lady was quite rude to her. She told her to prepare a detailed document listing all her activities in Canada and why she overstayed her visa. Then the leaders in the Embassy will have a meeting to discuss the situation and make a decision whether to renew her passport. This whole process will take minimum three months with no gurantee of passport renewal.
So basically my wife doesn't want to take such risk and wait for another three stressful months. I've decided to let her go back to China and get her passport renewed over there. She can then scan the new passport and email me. I'll then send it to CIC and meanwhile apply for an open work permit for her. (By the way, the CIC call agent told me that my wife is eligible for OWP but needs to be done by paper.) After she gets the work permit, she'll apply to return to Canada. The risk would be the Canadian visa office in Beijing may turn her down because she overstayed her previous visitor's visa.
So this is the process we're gonna try. If, in the end, whatever we try, she just can't come back to Canada for the landing interview, we'll just have to close the inland app and start a new one from outland.
It really sucks that this immigration thing will be haunting us for who knows how long. We're so very tired. My wife is leaving for China in about a week. It hurts that we won't be able to spend the holiday season together. We've been together for four years and never apart for any significant period.
Thank everyone again for all the help. Wish you guys have better luck.