Karla, I don't know what kind of proof you have for your info, but I will say that there are inconsistencies in the records I find. Her marriage record shows she was born in Ohio and her mother's maiden name was Roush, while that obit says Gilmer Co, WV and Horner, which was the name of the woman who married Columbus Watson. However, the name given for her daughter in the obit is Shirley Jane and you say your mother's name was Shirley Jean. Is there a possibility you have the wrong birth parents? It would be interesting to know who wrote the obit and how much they knew.
As for the WHY of giving an 8 year old up for adoption, it could be the stepfather was mistreating her and someone else offered to take her. Maybe she just had too many siblings and, being the oldest and the one from a different father, she was the one to go. I know of a case where they mother gave up a child because her husband didn't believe he was the father and took it out on the child.