Is it reasonable to expect my mother to be ok with moving from her house to a studio apartment in an AL? Downsizing?

Don't be frightened by people telling you that you must sell her house at fair market value to protect a future Medicaid application. It's not complicated as long as the sale is an arms-length transaction, which means that no family or friends get to buy the house on the cheap. Fair market value is simply the best price your mom gets for her house on the open market. Your best bet is to hire a realtor who is knowledgeable about her neighborhood.

For me your post was confusing. I guess Moms house is too much for her so your considering downsizing to an apartment. Seems the problem may be her monthly income? This is how I look at it. You sell her house and it has to be done at Market Value if she ever needs Medicaid. You then use her SS or/and pension to offset the cost of an apartment and use the proceeds of her house for utilities and food.

What you need to realize is Mom has Dementia. As such, she may not be able to live on her own. In my opinion an Assist Living would be a good choice but its private pay. Medicaid does not usually pay for AL or Memory Care. It pays for NH care which ur Mom may not be ready for.
As said, Dementia people get confused and like familiar surroundings. Its not wise to bounce them around from place to place.

In my opinion, it would be unwise to move her twice. A studio is affordable so move her straight into one. Moving is hard on old people especially ones who have dementia, and should only be done once, if at all possible. Arrange her furniture properly so as to optimize the space. Put her most cherished possessions on display. She will get used to the studio and may even grow to love it. Done well, studios are cozy.

Moves are hard on everyone but especially dementia patients so normally I would say the less upheaval, the fewer moves the better but there are two possible considerations here I noticed. First is do either of your options have a porch or deck where she can go sit outside and watch the squirrels the way she is now? Sounds like while her house may have a lot of space she has already closed her space to a smaller area so if you can keep the things around her that she uses now, her TV, chair and the ability to go sit outside it may help keep the change from feeling so drastic. I don’t know if that includes moving into the bedroom for the night or not, my mom for instance goes out to the kitchen and sometimes sits in the living room but for the most part she lives in her “big room” sleeping on the couch (it’s a battle we stopped fighting a while ago) so a studio space probably would work for her.

The other thing to consider is if mom is moving to AL with dementia, depending on her progression and needs, she may need to move to memory care before too long and that is another move. If you decide on the 1 bedroom she may need MC before you need to move her for financial reasons and skip the extra upheaval. Are all of these, IL, MC, nursing care available at the same facility, same property?

She probably loves her home and watching nature in her backyard.
Is there a possibility of exchanging with a home health aide, or a nursing student (or two) - or some other kind and patient person --

(maybe a senior citizen who is in good shape physically and mentally and pleasant ) who likes being mostly at home... And spends most of their time at home.

Letting them live in the house and watch after her while they are going to school or maybe they work remotely on the computer etc. It would give her care and company.

It would help both of them out, plus keep your mom happy in her own home.

With dementia, all bets are off on reasonable and logical anymore. But the caregiving arrangement needs to work for both parties or it isn't working. It may not be enough to just downsize her life. Your profile says your mom lives in FL and you/hubs in MD. It would be no surprise to many on this forum for your mom to be very resistant to any changes, even minor and reasonable ones. You may need to have her assessed by a facility to see if AL is even appropriate for her. She may need MC sooner than you think. From my own experience I think you are still engaging with your Original Mom and not your Declining Mom. You will need to have no expectations of what she will do and how she will react, since dementia changes all that in her. Please view videos or read books/articles about dementia and decline so that you can learn how to better interact with her so that there's less stress for everyone.

Even if your mom was the most responsible money saver, the cost of care is so high that the average person cannot afford to pay for it for long. If your mom has more assets than just a checking account, house and car I strongly recommend investing in a consult with an estate planner who is experienced with elder issues and Medicaid prepping. There is lots to know and the rules differ from state to state. There are many pitfalls that family members mistakenly fall into which can delay or prevent qualifying and if you're her PoA you need to know what these are.

Are you planning on moving her to a facility near you? If not, why not? With elders in decline, it is best to make the fewest moves possible as this becomes very distressing and disorienting and a lot of work for you. She will (most likely) become more resistant and unreasonable as time goes on, so it may be best to have this next move be her last. I am overseeing care for 4 elder LOs. One is in a NH local to me, 2 are in FL (I'm in MN) and my mom lives next door. If my FL elders didn't have local cousins living next door helping to provide hands-on care for them, I'd have moved them up here. It's so much easier, less stress and provides better advocacy to them, even if they don't "like" it. I hope this info helps you. I wish you much wisdom and peace in your heart with whatever arrangement you settle on.

With Dementia won't your mother need caretaking help wherever she lives? Can you hire in home care-taking or are you the only caregiver?

If your mother stays in her home with in-home care you/she will also have hire essential outside help for maintenance.