If my wife moves from her iCloud storage to the family shared iCloud will she lose her files?

No, your wife won't lose her files. Turning on Family Sharing simply adds the features to her iCloud account, which can include more data, and other features. She will see options on what of her iCloud data she wishes to share.

When you leave a Family, your iCloud simply loses the Family sharing benefits, including shared apps, photos, etc. But the data doesn't get deleted, it remains unless you actually delete to make room. This way, if you rejoin the family it simply makes the data visible again. The data does remain visible on the iCloud account of whoever set up the Family share in the first place, btw.

For everyone else that might be looking - I just got off "chat" with Apple support and they confirmed that this WILL NOT delete any files - they will be copied to the new shared storage.