Alterations are absolutely a viable home business, but having solid expertise in an in-demand niche is critical. Sadly, "general sewing" is very undervalued when it comes to getting paid for your time and skill.
For example, my neighbor does wedding dress alterations as a part-time gig from her home sewing studio. She must bring in at least $3,000/month, based on the cost of alterations and how busy she is. BUT...she has decades of experience, hires a part time assistant, and partners with a network of dress-related partner businesses (the special cleaning and pressing service, etc.) for better prices. She's booked for months in advance and gets all her business from referrals.
We also have some local quilters who do long-arm quilting (using big, expensive machines that can turn out extremely fancy designs) for $50 - $200+ per quilt. Given the initial machine investment and the time they put into each quilt, and the fact that there are 3-4 ladies who offer the same service locally, I don't think they can be making much profit off each job.
I'd suggest your wife look into some specialized alterations classes, like for event wear or custom lingerie, and consider what would sell well in your area; machine embroidery services are popular near college campuses, and a patch sew-on service is handy for with scouts and motorcycle riders. :) Good luck!