How can we apply for a Z visa for her and can she change her 'L' to 'Z' in China?

I think you'd better ask an agent to handle it for you. It sounds easy but very complicated in fact. First, she needs to do a health check at the appointed hospital and then you have to help her apply for the employment license from the local labor and social security bureau. Then she can apply for the two months temporary residence permit with her employment license. She has to register her temporary residence permit at local PSB. Then she has to get the alien work permit. It takes about five days to process it. Then she can apply for the 1 year temporary residence permit from the local PSB. It takes about five working days. Last step is to register her new 1 year residence permit at local PSB.

It's the process that has been done before the new regulations came into effect on July 1. I don't know if there are some new changes now.