I think Lucy's capable of doing the job. She's got a good sense of community, and she shows some good ethics/morals. Gotta remember that people are gonna mess up. I know several staff members who were once community banned and then returned to go even higher than before. You learn from your mistakes. You adapt. You grow. It's not a matter of "you shouldn't be staff because you made a small mistake" because that's almost like saying "our staff never make mistakes".
I know you guys wanna put a stop to any fires before they're actually set - that's understandable. But being a moderator is also like being staff with training wheels. I started out as someone who didn't know the best way to approach sits, to someone who was doing them and actually enjoying them.
I'd say give her a chance.