For those who are curious in having the reg dissected asap, what exactly would you be looking for? Do you have a list of possible reasons why the reg would fail in the manner described?
If a regulator is working fine during a dive and then immediately delivers a mouthful of water instead of air, there are only a few things that could be responsible, all in the 2nd stage. Any 1st stage or hose failure would result in air leaking out, not water leaking in, as long as there's pressure in the tank.
1. The diaphragm could tear badly. This is really unlikely, I've never ever seen a 2nd stage diaphragm tear catastrophically, and I've seen many that are way older than 20 years.
2. The diaphragm could somehow become dislodged. This is also very unlikely, probably only could be the result of really bad servicing.
3. The exhaust valve could get folded over and allow water to get in. This is probably the most likely scenario.
4. The mouthpiece could tear or leak. This is also fairly common, I've seen a 2nd stage just drop right out of someone's mouth, leaving the mouthpiece in the divers mouth. She had a bit of a surprise next breath!
5. There could have been a crack in the case which somehow got way worse during this dive. This probably would have been obvious to anyone looking at the 2nd stage after the dive, so it's not likely to have been the problem.
The fact that this was a 20 year old regulator is completely irrelevant. First, 20 years is not that old; second, good service techs would inspect the exhaust valve and diaphragm and replace them if there was any sign of wear.
There is another possible culprit, that would be water in the tank coupled with a missing dip tube. It's easy to check; if there's a lot of water in the HP section of the 1st stage (probably in the SPG as well) and the filter is green, there's your answer. My money would be on the exhaust valve or a leaky mouthpiece.
In this situation, I'm glad your wife is ok, and it is really scary inhaling water. But, the real cause of the accident was her reaction, not the fact that her equipment failed. Any piece of dive gear can fail at any time; they're all mechanical devices. Its up to divers to be able to deal with gear failure in a responsible way, and for dive buddies to be close enough to assist. She panicked and is lucky that it did not end way worse. We're all glad about that.
Regardless, she may never get back in the water with that reg anyway, so it's time for a new one!