My wife’s H1 was approved in 2009. She worked 8 months,went to India for stamping in June 2010. After the interview, the Consulate issued a 221(g) blue form requesting additional documents from the Employer, I797 and the passport. The documents were dropped at VFS on June 9. 3-months after submission of the documents, on Sept 9, 2010; the consulate returned the passport and issued another 221(g) stating additional time is required for administrative processing. It also mentioned that they will contact us later.

Can she cancel her H1 app and travel back on H4?
Will the H1 app be considered as rejected?
If she does travel back on H4, can she apply for H1 again immediately (her employer is ready)?
Is there a possibility her new H1 would not be issued because the prev H1 was rejected?