Yes I see the problem. Why not save the money on lawyers anyway and write yourself with an implied threat of legal action by saying something like:
"While I do not accept that I have infringed your copyright any more than you have infringed mine, I'm sure we can come to some sensible agreement between ourselves to our mutual benefit. (Clearly, I'm sure you would agree that there is no sense in us alternately issuing DMCA notices against each other until we both go out of business!)"
Could you offer to both link to the each-others site? That way she feels like she's got something out of you, you get another incoming link .... and hopefully your site is better anyway so you will get more business out of it, if anything
Good luck!
Steve