You know what, Miriel? When organizing a large event, you're always damned if you do and damned if you don't. All you can do in the end is go with your gut feelings on this. I think Siyu's suggestion for allowing her to just place her own booth is a good one. You didn't actually specifically state that the booths would be no mod and this might be a way to just gracefully end what could end up being unnecessary drama. Ultimately, though, the final decision is yours.
You're doing the best you can and organizing a very popular event. Give yourself a pat on the back, you deserve it.