From what I understand, her father and stepmother all already licensed foster parents with the state. If Nancy were to have signed away her parental rights, her father and stepmother could either have retained the children as foster parents or chosen to adopt them. Without termination of parental rights and the mother's desire to fight to keep them, the children are wards of the state until a determination can be made. Since her father's health is a concern, they are unable to care for them. The article at the link below talks about Nancy's stepsister having flown here from Germany to adopt Damon and Gabrielle.
Another interesting quirk about this is that Nancy herself posted on several Indianapolis Star message boards over the past 48 hours to "explain" her position. Her stepsister has also posted. If you want to read these, click at the link at the bottom of each article. Each article has a different "comments" board. Nancy posted as "Rush to Judgment" and her stepsister posted as "Set Record Straight."
A most unusual situation, to say the least.
http://www.indystar.com/apps/pbcs.dll/article?AID=2007701090377