Found the problem- USER ERROR
In this model of Corolla, the AC kicks in whenever the Defrost setting is selected. This is a "feature" that will remove moisture from the incoming air, and speed up the actual defrosting of the windows.
Turns out my wife was in the habit of running the defroster, then switching the fan to OFF. This would trap moisture in the AC evaporator that would later evaporate INSIDE the car, causing the condensation.
Solution is to change the control setting to Heat after the windows have cleared, and running the fan for a period of time to clear any residual moisture out of the system....
H