Why not a pellet heater? I don't recall any significant smoke, etc from the one my in-laws have in MI. It put out some awesome heat too.
Also, is there anything that restricts the exhaust, at all? I remember my grandmother's wood stove sucking a ton of air in and not really smelling a lot of smoke.
Have you tried using it just to see what the effect on your wife is? It may not be as extreme as she anticipates. I can't blame her for being anxious about it. I'm sure she has had her share of traumatizing moments not being able to breathe.
If it doesn't work out and money is