I think it's a little much to assume that she's a liar. Not all helpers are well educated in the law, or well educated at all. There are many, many helpers who live out for years with no problem. So maybe she sees that and presumes it's OK. As she's been here so long, she might also be remembering the laws from when they were more flexible.
Ignorant? Yes. But untrustworthy and a bad person? I wouldn't jump to that conclusion.
Yes, you might get into legal trouble. But the majority of my friends have live-out helpers and, in more than a decade here, I've never heard of anyone getting in trouble. So long as the situation is clearly explained and a mutual decision -- and so long as you are fairly paying for decent rent, food, and transport -- many people do it. I think the government only goes after you if there is a big problem, like an overstayed visa or an abuse case.
I know this doesn't help the OP, but I think it's so unfair that people of all other nationalities -- Chinese, Western -- can have the freedom to live where they want, but Filipina FDH are forced to live in, either if both their employers and themselves don't want it that way. Could you imagine if someone told you you had to be separated from your husband and child for employment reasons?
Personally, we are hiring a live-out FT helper. She clearly stated she wants her own independence, and we clearly want our own privacy, too. We've discussed this with our agency, and filled out the form saying that we do have a spare room which is available to her (which is true). And we will pay decently for an outside apartment for her. We just want to do the best for our family, and our employee. Wish us luck!