If she isn't earning any income from her self employment she no longer can contribute to her SEP. She doesn't have to roll it over, money there can stay where it is.
If she wants to contribute to an IRA based on her earning from her W-2 job, she should set up a traditional IRA.
The applicable publication from the IRS on SEP IRAs is: http://www.irs.gov/publications/p560/index.html
Investopedia has a nice article on SEP rules. SEP IRAs: Introduction
Also look at IRS publication 590 for traditional and roth IRAS: http://www.irs.gov/publications/p590/index.html