i used to work in 401(k) administration... $125 seems pretty reasonable to me. when I worked there, it might have been about $75 to rollover the account - there is a surprising amount of work that goes into losing a customer to another business. i'd be willing to bet that your plan has offered documents proving that this fee exists in the last 2 years (if not earlier; for example, when she signed up for the deduction) - considering that it is now against the law to have that fee hidden. also, if the employer (trustee) hasn't sent this info regarding the fees, you should consider relaying this information to them as they could be in SERIOUS trouble with the IRS.... there are MONSTROUS that accompany that lack of due dilligence.
if you weren't aware of the fee, it is important that you make yourself aware of what you are signing with the new custodian of your assets
indeed a notarization is something that should be required! i am surprised that they don't require more than that - i suspect they really want a Medallion Signature Guarantee from Vanguard! "Medallion Signature Guarantee" which is an indication from the receiving bank that the person signing for the money is who they say they are and have authorization to accept the money (a responsibility given to a trustee). how would you feel if someone was able to get access to your account (somehow) and had a notary buddy that was ready to "witness his signature" and then cashed the check and took off for mexico 2 days after it cleared the bank.
it would probably also be wise to remember that this process sometimes takes a pretty good chunk of time.. AT THE VERY LEAST, high priority clients (not likely, since they are loosing your business) would get the money rolled over in a week. Expect more like 45 days, but stay on their heels or have your Vanguard rep do so
best of luck