To find out 'What happens to your iCloud storage plan when you sign up for Apple One' click here --> https://support.apple.com/HT211784
The document describes various scenarios, including ones where you may have two subscriptions going at the same time, but yes, she can cancel her subscription as long as you have set up sharing with her.
As long as you are using different Apple IDs you content will remain separate.
More information:
Bundle Apple subscriptions with Apple One - https://support.apple.com/HT211659
Apple One "In case you missed anything." FAQ at the end of this page --> https://www.apple.com/apple-one/