Mmmmm a tricky one. I cant write a detailed post as am about to go out.

I have the same problem when watchin neices and nephews, and unfortunately there is not much that I have been able to say.

No there is no law that states that a 5 point safety harness is required.
I have seen an episode on TodayTonight once a while ago that highlighted the problems with using an ordinary adult belt. As the belt cuts in during an accident and can cut their liver etc without you seeing any external injuries. Maybe you could go to their web site and have a look around.

I personally dont think there is too much of an issue of it not being anchored down, as long as the child weighs enough. The main issue here I think is the 5 pont safety harness. You can go out and buy one of these to convert a sash seat belt(like is used) to the safer and much more comfy for the child, 5 point one. Then you can also get a side clip thingy which holds part of the seatbelt together to turn it into the lap sash that goes through the middle of the safety harness. The safety harness has to be anchored like a car seat.

I think maybe rather than suggest she has got the wrong seat, just ask her if she knows that there is a product that they sell separately that goes with it to adjust the seat to a safer more comfortable ride for her little one. I am pretty sure you can pick them up on the car seat safety racks in Target and Kmart.

All the best.