While you can sync multiple devices into one iTunes library, for the most part, you can't have one device that syncs with multiple libraries.
If you try to sync a device that's been setup with a different iTunes library (i.e. yours) on another iTunes library (i.e. your wives), you get the prompt that you got.
What in her library were you trying to sync? Some iPhone apps?
Yes.. Since the device was synced on another library you can't. However, you should be able to right click on the device and then transfer purchases. So then all the apps and everything you have on your device will be on the new computer you wish to set up syncing with. Then when you click transfer and it tells you everything will be wiped out it is okay because you will get them back with syncing to the new machine.