The SIM is or is not Virgin, not the handset. The handset may, however, be locked into Virgin.
If the salesman thought her phone was already unlocked why did they suggest getting it unlocked ?
In any case that's hardly the issue, the issue was that what was bought was not what the customer thought they had bought. It's unclear whose mistake it is but the retailer should be sufficiently savvy to know their reputation is worth more than insisting it's not their fault, and so be willing to change the item.
No doubt there are problems if the Vodafone has been turned on and registered with the supplier. It's not like one can easily return a sold account to an unsold one again. But that ought not worry them too much.
I can't advise on the legal position but I think, given your account, phone 4 you are not acting intelligently, or even in their own interest. Tell the salesperson you wish to speak to a manager.