To me this is very nonstandard. If the employer gave you the $500/mo, and is now requiring that you provide proof of how it was spent, I'd personally go down the path that it was a "substantial change to the employment arrangement."
With a "substantial change" argument, whether it's decided that you quit, you have a good shot at it being a good cause quit or if it's a discharge, it can't be misconduct because you don't have to accept adverse changes to your terms and conditions of employment or forfeit your rights to unemployment benefits.
she feared that if she signed the document it would take precedence over any verbal instructions and that she would be held to the written document.
This is a legit fear. It's "Judge Judy" 101. You can't modify a written contract verbally. If the Dr. was willing to change it, he should have printed out a new one. You don't have to do it.
This whole thing just smells so wrong. Appeal it, and hope that the next judge at the board of review sees it correctly. Just remember that "insubordination" is not always misconduct. If the employer brought you a piece of paper to sign saying that you agreed to work for less than minimum wage, it wouldn't be enforceable, and normally an employer can't just make deductions from your paycheck or make you agree to such an arrangement. I think your hearing officer was way out in left field.