Looks like if the city relinquished responsibility for the alley they reliquished ownership also. If I were you I'd start having neighbors look at their property deeds, property tax disclosures and the like to see if the city is charging property tax or not. If they are, then if they deny you and your neighbors "reasonable access" then they might be sued successfully or forces to keep the 'reasonable access' part viable. My guess is that since she was able to do this is that the ownership aspect of this is unclear...you should find this out first....
I agree with you. If the alley is closed and the thread author's property backs up to the alley, there's a good chance he can claim ownership of that portion of the alley to the center line. Fence it off and make the old bit,,er I mean lady's access Zero.