Thank you for your analysis and suggestions!
To clarify, I started using EAD card on 03/27/2006 and she arrived in US on 03/29/2006 on H4 and the expiration date in my I 94 is 05/15/2006.I filed 539 application on 05/01/2006
What you said reminded me of the past two years, yes, her status has been based on one pending case after another, and at the beginning was on an invalid h4 visa. In fact we were following the advice of a well-known local immigration attoney. But I am not sure about whether it is right or not now. The action we took after 539 application was denied was to file I485 to stop the counting and to keep her legal status. Anyway, we will meet two attoneys tomorrow for different opinions and then decide on further actions.