Question: Is there a fallacy here, and how to respond to it?
That's a hard question, and I hope that you will do everything you can to help Liz. I wonder if she could use some short-time counseling or a professionally-led support group to help her get through it. How would I know? But I'll suggest a few possible fallacies that aren't in any fallacy book that I know about.
First, maybe "Can't see the forest for the trees."
Second, maybe, "lack of proportion."
Anyway, good luck to both of you. Peace.