Yes, she can still use the capital gains exclusion.
Yes, Turbotax can handle an installment sale. The interest is taxable income, and any gain after the exclusion is taxable gain, but the exclusion on the gain does not apply to interest.
What I can't tell you because I haven't used this part of the program, is how it all gets reported. If you need more specific answers about how the program works, maybe someone else can provide them.
