They say the larger wheels roll easier and full suspension and ‘modern geometry’ (whatever the hell that is) give you more ‘confidence’ to ride over scarier stuff.
Modern geometry IS going to be more stable but 2005 isnt "that" old. I don't follow your gearing discussion at all, but I certainly would stay away from 29" wheels, especially if you are small. I've met enough small women that do not love thier 29ers to make that recommendation.

Really the best thing for building confidence is learning skills. It's not the bike, it's the rider and if the rider is not confident, it doesn't matter what bike you put them. If you want to gain confidence, look for a clinic.