byron19,
I managed to find some time and research the immigration rules a little and it seems to me there is no delay penalty at all for those making settlement visa applications.
Please read the links and the guidance below and see if you agree.
On the question of overstaying I don't believe this should present a problem for your fiance under 'normal' conditions.
Normal means no other immigration offences. This is where you need legal advice from a professional. Especially in terms of possible illegal working etc.
BTW, during the overstay period of your fiancee, did she ever seek treatment from the NHS?
The Immigration Rules are here please look to 320(7B) and 320(7C)
Please also look here for further information