We have a teenage African grey who is actually owned by my mother-in-law. We have been baby-sitting her for two years now and have made some major changes in her care since we got her. She went to the vet for the first time and was switched to a pelleted diet. My mother-in-law always fed her bird seed from Walmart and I'm worried her cheapness will undo all the hard work we've done getting her feathered again and up to weight (she came without a tail or back feathers and 50grams underweight). When we told her we switched to a pelleted diet she scoffed and said its just expensive and not better for her at all and every time we talk or she visits she makes snide comments about her still eating "fruit loops" instead of real food. The difference is inarguable, she has a full set of feathers and weighs the proper weight. Is there any good arguement to convince her to keep her on pellets?

MANY good reasons to keep her on a pelleted diet (if it is a good quality one). Personally, I like Roudybush. The birds seem to like it and they don't pick one color over another. They make far less mess and waste MUCH less! It is actually more economical in the long run.
However, there is more to ANY diet - even a pelleted one! She should be eating fresh veggies and human foods too. African Greys do well with a calcium supplement. Scrambled eggs with the shells crushed right up in there is good! Fruits are ok, but don't leave them in there too long and don't make it a major part of the diet. I freeze bananas, then cut off a round slice (peel and all). Let it warm up a bit and keep the peel around it. Gives them something to hold on to. I used to have people come into my store and say their bird doesn't care for bananas too much but they are kind of slimy to hold on to :) I even have soaked a small amount of pellets in apple juice and the birds loved it. Not all the time - but once in a while for a treat.
With seeds, birds pick out their favorites, which are usually sunflower seeds. Not a healthy diet by itself! My opinion is pelleted is definitely the way to do - with all the birds we have had over the years, I've never met one we couldn't switch to pellets ;)