First, I'd try to educate her about the fire danger. However, she sounds unable to understand that she just might be wrong about something. Then I'd probably just put in what she wants and let the local Inspector knock them down.
If I wanted to maintain my credibility with the AHJ for doing quality work, I'd find a quiet way of letting him know that I knew that it wasn't right but that's what I was told to install. I'd also see if I couldn't give him a backdoor hint so that he wouldn't miss it on Final.
Also, IMHO, Iwire's right on.
