If these claims are completely meritless, you may be correct. However, if there is even a shade of truth to them (including if she was a willing participant) then there would be a chance that a jury would find O'Reilly liable. As such her attorney, as a duty to explore settling all claims at any point in the litigation process. That is not extortion.
Here's why, emotionally, the case feel like extortion, even though legally it likely isn't extorition:
1 - In the typical settlement negotiation, the explicit claim is "Give me money or else I'll get more money from you in court," and the addendum "plus, your reputation will be detroyed" is obvious but left unstated.
2 - But here, the plaintiff's lawyer allegedly said, explicitly and as a negotiating tactic, in effect, "give me a lot of money or I'll destroy your reputation." Sleezy, but if there's a good faith claim involved, then likely legal.