Tell her the truth. Say that you work really hard to maintain your image as a photographer and that the quality of the photos is very, very important to you. It's your personal brand. You want her to have the 'brag books' she wants, but still be able to present the best quality alongside your name, as you're sure she understands. Then work out a deal with your lab for the books, and make it clear that the choice is really hers, how much she values what she wants.
(But be prepared for someone she knows to use a clone tool to get rid of the watermarks.)