re: Need advice on how to handle this situation

You should give them back. You should have given them back when she first asked for them. You are in your rights to keep them because they were a gift, but that doesn't mean that keeping them was the smart thing. It would have been best to try to salvage the relationship to be at least a workable professional relationship when she first asked. Now you have more damage to repair. It is still worth it to try to do what you can. You might not even want to associate with her the same way as before given the sketchy company she keeps, but you should still want things to be cordial.

I know nothing about this hedgehog breeding business. Is this legit? What are the uses? Is this just pet breeding?