My H1 and my wife's H4 have expired in Dec 2009. I filed for an extension of H1 in Dec 2009 but got a RFE on employer employee relation ship.
----------Did the lawyer replied to RFE? If your H1 extension gets denied then your wife will not be on H4 status and her H4 extension will also be denied. you can stay in US as your I-485 is pending and can work with EAD.
I have EAD but my wife has not yet been added to my I-485
---------- What do you mean by "wife has not yet been added to my I-485"?? Did you only file your I-485 or Her I-485 is also filed and pending? if her Derivative I-485 is also filed then she can stay in US if your H1 and her H4 gets denied. if her I-485 is not filed and her H4 EXT gets rejected then she will not have any status in US and should depart US.
so she is out of status since Dec 2009.
-------If her H4 extension was filed with your H1 extension BEFORE her I-94 Expiry date then she is NOT out of status as her H4 is not denied at this time and her H4 and your H1 EXT are Pending. if USCIS sends Denial notice of your H1 and her H4 then only she will be out of status from the date her I-94 got expired.
Can she convert to F1 now? Does she need to be in status to convert?
------I dont post for F1. One should be on valid status to file Change of status. Talk to your company lawyer .