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Immigration Issues/H1 to H4. Please advice


What is the name of your state? California

My wife and I have been on H4 and H1B visa for last 3+ years respectively. We recently (November 2003) got our extension for the next 3 years and got it stamped (Sept. 15th) on our passports at St. Louis. So that is valid until November 2006. Now, my wife got her H1B approved (receipt date Sept. 17th and Notice date Sept. 24th) from a contracting agency (situated in New Jersey) valid from October 1st 2004. Along with her Visa, I guess her status was also changed. Her I129 form has the “Part 2 Box 4.b” is checked and her I797 says “The above petition and change in status have been approved.” She hasn't yet received any pay stubs, but has applied for her SSN. Now, my wife doesn't want to continue with the contracting agency and wants to go back to her h4 status. So now here are my questions:

1. Is her H4 still valid?

2. Is her status legal currently? (Since it is more than 60 days past her H1B without paycheck).

3. If no to #1, then how can she convert back to H4? What is the procedure for this (form DS156 or I539)? How soon we need to do this?

4. Since her H4 is still stamped on her passport, will crossing border (Mexico or Canada) with the H4 solve the problem? I mean will it supersede the H1B? Is this option better than applying for change of status? The contracting company is ready to issue paystubs once her SSN is available. Is it advisible to get a couple of pay stubs and then convert back to H4?

5. Will this have any affect on our future Green card processing?

Please let me know.

AS you are aware, H visas are non-immigrant.  You appear to be an intending immigrant, therefore have obtained your H visas under false pretense.
Technically your spouse is out of status.  I would strongly suggest you go to the nearest CIS office and get things straightened out.  If your situation makes it to the ICE Office of Investigations, you may have more heartache on your hands than you anticipate.  

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