I'm the Canadian who was detained by ICE for two weeks

This whole debacle scares me. It’s almost impossible to figure out the official reason she was flagged by the first border officer.

She had a prior denial for a work visa. Then flew into San Diego to apply the second time and got it. Apparently, she should’ve applied via her consulate instead because of the prior denial ?

Can someone explain in non legal terms why this resulted in a visa revocation and detention?

If you've previously been denied a visa you're no longer able to use the visa on arrival system. Hence you need to apply for a visa before you travel.

I think the question is: why were they even let in at the border crossing if it wasn't a valid entry? Shouldn't they have been turned back there?

Very likely, that as a Canadian, you can enter the US without a visa as long as you do not work. You need a TN visa+status to work. So probably entered US on passport (no visa status) and then applied for TN... during which things went poorly.