I talked to my lawyer. MY lawyer said there is no need for H4 extension bcos we filed for AOS. But my company is going to file extension for me and I do not think we will get the receipt by then. If something happens in my I485 filing and if I do not apply for extension for my wife along with my h1b , my wife will be out of status. My lawyer agreed to file H4 extension and I am waiting for the paper to sign.
Nov01RIR
I do not know much abt converting H4 to H1. If you wife has valid status till you get your receipt, I think it should be Ok.