My wife was recently laid off and doesn't have a large 401K. Can she, and is it worth it, roll this money into a Roth?

Layoff is not a complete seperation of service. Therefore, a 401k distribution without penalty may not be possible. Check with employer plan trustees.

If the participant is eligible to receive a distribution of the account balance, Roth 401(k) funds can be rolled over to a Roth IRA. Pre-tax 401(k) funds can be rolled over to a Roth IRA as long as the conditions regarding AGI limits and filing status (married filing separately not eligible) are met. The distribution must be included in the participant's income for tax purposes. The 10% premature withdrawal penalty does not apply.

See IRS Publications 575 and 590 for more information.