b) Treat it like a firing, in all respects. I'd start looking for new employment immediately.
(Even if they came back with an offer, you should not work for a company that has that attitude with regards to FTEs. There is nothing wrong with "OK, now we're going to subject you to four months of unpaid downtime while we evaluate another guy for your job" - it is routine if you're a consultant billing several hundred an hour. If you're not, no, just no.)
c) On the plus side, she dodged a bullet there.