It is only able to be converted by a limited number of virtual, online banks into a legitimate currency. Most banks or businesses will not transact business using that currency, as such it is not a viable choice for doing business in most cases. It may be viewed as an investment, but not a real currency.
You can't generally use stocks as payment for goods and services, in a similar manner, and you have to report your earnings (capital gains) when you convert bitcoin to currency, like stocks.
Is Bitcoin legal tender ? She said no. She is correct.
Is Bitcoin recognised by any government ? She said no. She is correct.
Is Bitcoin responsible for the legal cash money that you give them, are they required to honor your money ? She said no. She is correct.
Is Bitcoin required to give you equal value, Bitcoin on dollar ? - She said no. She is correct. There is a transaction fee, like a broker's fee for the transaction to and from cash and bitcoin.
Is Bitcoin ensured by FDIC ? She said no. Just like any investment in the stock market, or foreign currency for that matter. Only US dollars up to 250K per bank it is deposited in are FDIC insured. Your IRA and 401K are not FDIC insured either, but are more reliable investments than bitcoin.
Can I get into trouble by purchasing bitcoins with government money ? She said I could lose my benefits and owe money (USD) to the government. Here she is partially incorrect. It is an investment. You could lose value, but it is your funds to invest however foolishly that you wish. You will have to pay what you owe, in USD, to the government, when it is due, regardless of where you obtain the funds. If you cannot pay, and remain delinquent on taxation due, they can confiscate your home, cars and other belongings, tot be sold at auction to pay for what you owe.
... anybody in this house giving our money to Bitcoin. The answer is no. That is sound advice. Since decisions on finance should be mutually agreed upon, her voice was made clear - it is not an investment that she approves of. Until you can change her mind, to the contrary, it would not be wise to invest in bitcoin.
Keep in mind, it is an investment, not a currency. It's value fluctuates, like stocks, and also like foreign currency. However, unlike currency, there are very few places to convert from bitcoin to other currencies, but most banks will convert other currencies to USD to spend anywhere that you'd like. Also, the US Government views it as an investment, and requires conversions to be treated like stocks, with capital gains, but other currencies are simply currency, and do not need to be tracked.
Therefore, for all practical purposes it is simply an investment, and per your wife, unwise, if you value your relationship and marriage.