Perhaps she meant that her family has a history of mental illness that she's concerned could be passed on to a biological child, and not that she herself has a mental illness.
Jade, have you checked out holtintl.org? They have a China adoption board and the people are quite friendly and helpful. The Korea and Post Adoption boards are great, too. I post every once in a while, but have been a lurker for years! Also, I recommend you check out a4everfamily.org as it talks about attachment problems and how to foster healthy attachment with an adopted child. Attachment is a huge, gigantic thing when it comes to adoption and it's best to know as much about it as possible before bringing your child home. There are a lot of books about attachment in adoption as well.
I'm only 22, but I've wanted to adopt from China since I was 10 years old. Still have 8 years to go until I qualify, and I'm using that time to learn more about international adoption and Chinese culture. I'm learning Chinese in college right now, for example. I've pretty much always considered adopting from China to be an eventuality for me and how I will have my kids. My boyfriend and I talk about it a lot and if we marry, we will likely have one biological child and then adopt two. For my age, I probably know way more about international adoption, specifically Chinese, since I've been reading whatever I can get my hands on for about 8 years!
While these books aren't specifically about how to adopt from China, I think they're very valuable and will give you a broader view of Chinese adoption. I own both and really enjoyed them and learned a lot. The first is the most educational, the second is informative as well but is more of a personal story:
Wanting a Daughter, Needing a Son: Abandonment, Adoption and Orphanage Care in China
http://www.amazon.com/Wanting-Daughter-Needing-Son-Abandonment/dp/0963847279/ref=pd_bbs_sr_1?ie=UTF8&s=books&qid=1197247000&sr=8-1
The Lost Daughters of China
http://www.amazon.com/Wanting-Daughter-Needing-Son-Abandonment/dp/0963847279/ref=pd_bbs_sr_1?ie=UTF8&s=books&qid=1197247000&sr=8-1
There's also a book called
Mei Mei which isn't really informative, but is full of photos of little girls in Chinese orphanages. It's very sweet:
http://www.amazon.com/Wanting-Daughter-Needing-Son-Abandonment/dp/0963847279/ref=pd_bbs_sr_1?ie=UTF8&s=books&qid=1197247000&sr=8-1
Best wishes to you and I look forward to hearing what you decide!