Your laywer is right. Your wife lost her status

after you change to H1B. The only situation that she can change to H1B is that her H1B is quota exempted. Otherwise, your wife may need to leave and comeback on H1B visa after 10/1.
Right now try to file H4 first and then notify CIS about this. However, no guaratee that CIS will take that into consideration when approving your wife's H1B. If you visited this board early before your wife filed her H1, you would not have this problem. good luck