From your post, I assume she was making $20/hour for 50 hours per week? I'm not sure why she is not happy with the raise you have offered, as she was making a good rate to begin with, and $1/hour increase is standard.
The only thing that I can think of that might have her feeling unsatisfied is that her duties or schedule have changed throughout the year in a way that she feels warrants a bigger increase, or something you all originally agreed to as far as benefits has not actually been the case (ie. a share nanny agrees to the traditional 1 week her choice, 1 week yours, but never gets the second week because the families don't vacation at the same time).
My suggestion would be to bring it up with her. Maybe she was expecting $1/family.