Lone Wolf does work with the 4 player coop mod and, yes, I realize this will probably be a lot easier than a normal two source hunter game. That's why I'm not that concerned if my build isn't totally perfect, in fact, if she ends up a little on the nerfed side, it might make the game more fun (read: more challenging) anyway.
How do those extra points in those magical skills help exactly? I just thought putting more points into hydro would make my heal spell more potent. Is that not the case?
That is indeed not the case. INT makes spells more potent, just points into the school don't do anything except let you learn more spells and use higher-ranked spells with less or no AP penalty.
Basically I want a character that focuses on healing, but can also deal some damage occasionally when circumstances are right. My vision is for her to hang in the rear every battle buffing the party, and only come up to attack when the enemy's backs are turned.
If you want buffs, then you'll definitely want points into some other magic schools. You can probably skimp on STR, just enough to keep up with your swords, since STR only boosts accuracy and chance to hit. The rest of your points should go into INT and SPD.