I too have a family member who was sectioned for several months having become demonised - in her mind. She is now stable and healthy again, thankfully, but we went through a very frightening time with her when she was ill.
The question here, surely, is that the woman mistreated her cats before not because she was bad, but because she was ill? So if she has recovered fully, then shouldn't she be given the chance to have her pet back?
Also, I understand that it would need to be her decision to have the cat spayed, but has anyone thought to ask for her pemission to terminate the pregnancy if it is in early stages? It's this sort of objective thinking that gets lost in the emotional upheaval when things are not black and white.
Not sure what the Mental Health Panel could do about this. They won't discuss the personal situation of a client - if indeed she is under the care of the Local Authority - with anyone outside the immediate family. But if her cat is important to her she may well listen to reason about her future care, and in fact welcome an offer of support from you and your friends.