Yes, she should definitely be waitressing while she is looking for a FT job in her field of choice! Like both PPs, I'd recommend that over a cashier job because she has potential to earn decent money and hopefully even save up a few bucks. PP, tell her to apply for EVERY unpaid internship and see if she can do multiple at a time. Also, if she can, an admin position at ANY office would serve her even better than waitressing. To get an entry-level job at a publishing house, they'll want to see she has office/assistant experience.
NO-- she absolutely does NOT need a masters to get a job in editing/publishing. PP, Unless you're willing to pay for it completely or she somehow manages to get a free ride, she'll be wasting her money completely. An undergrad degree is all she needs. In fact, with a masters she might run into the problem the OP has-- people not wanting to hire her because they know they'd have to pay her more in accordance to her degree.
OP-- I am so sorry.

I know there are no words that will make you feel better, I just hope your situation improves soon...