Picked in H1B lottery but rejected after RFE

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Hi
My wife had applied for an H1B visa during April, 2015 and was selected in the lottery. When her employer applied for the H1B visa, they received an RFE request owing to documents required to furnish details of the employment role in US. RFE response was sent and recieved at USCIS somewhere in early August. There was no response from USCIS until November when the employer decided to upgrade to premium processing since there was a urgent need for her to be in US. On 9th November, 2015 the USCIS website said her I129 has been denied. We are still awaiting the details of why it was denied.
But at the same time I had a few questions
1. Does this mean her H1B lottery selection was also lost. Meaning any other visa application from same employer or another would have to go through Lottery again?
2. Is there a way the employer can appeal this denial and make USCIS reconsider the same applications? If so what are the expected time lines for such action?
3. My wife does have a L2 dependent visa. She was thinking of travelling on this visa. The problem is that her current employer's policies does not let them employ her using a dependent visa. What if she quit in hopes of getting the L2 EAD and finding another job in US? Are there any issues with the L2 EAD due to her current H1 rejection?
4. Also if there is a appeal possible, does my wife travelling to US on the L2 visa while her employer appeals the I-129 denial, cause any problems?
5. If she decides to quit and find an L2 EAD and a new employer, is her existing H1 lottery selection valid for another H1 visa application from the new employer, later on?

I am trying to access the different options and different scenarios to make an informed decision. Any information is highly appreciated.

[shervin143]

1. Does this mean her H1B lottery selection was also lost. Meaning any other visa application from same employer or another would have to go through Lottery again?
>>> Yes.

2. Is there a way the employer can appeal this denial and make USCIS reconsider the same applications?
>>> Yes, the employer can file an MTR.

If so what are the expected time lines for such action?
>>> It takes about an year to get a response.

3. My wife does have a L2 dependent visa. She was thinking of travelling on this visa. The problem is that her current employer's policies does not let them employ her using a dependent visa. What if she quit in hopes of getting the L2 EAD and finding another job in US? Are there any issues with the L2 EAD due to her current H1 rejection?
>>> Nope. H1B rejection will have no impact on L2 EAD. She can take a break from her current work, travel to U.S in L2 and apply for EAD. Once approved, she can quit her current employer. If EAD gets denied, then she can go back and join her current employer.

4. Also if there is a appeal possible, does my wife travelling to US on the L2 visa while her employer appeals the I-129 denial, cause any problems?
>>> No issues.

5. If she decides to quit and find an L2 EAD and a new employer, is her existing H1 lottery selection valid for another H1 visa application from the new employer, later on?
>>> Not sure what you are asking. Any employer can file a new H1B petition that is subjected to CAP (new quota). Petition can be filed only on April 1st 2016 with a start date of Oct 1st 2016 or later.