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I've heard from a frind of mine that my wife beleives that if she drops the charges, the State may take our daughter away from her in case that she calls 911 again in the future. She thinks that by dropping the charges she would be admmiting that whatever she wrote on the report isn't true, therefore she would be lying to the court or state. Is this correct?
If she goes to the prosecutor and says "Everything I said was true, but I want to drop the domestic violence charges", they probably won't drop the charge.
If she says, "I lied to the police", she risks the possibility of being charged with filing a false police report.
Your wife is partially correct. If she knowingly stays in a violent situation, endangering her child, the state may take the child away and place them in foster care until the situation gets resolved. It depends on how close of tabs they keep on the situation, and how bad it is.
Even if she says that she doesn't want to press charges it's out of her hands. Law enforcement will press them. Or should press them.