Okay, so there's a massive self aware NPC on the Northern continent, and the only way to solve the problem is to kill the game. Why isn't the company just explaining the situation and killing the game!?
Economics. A lot of people are invested in the game at this point, be they players or not (1/2 life has stores in real life too), and they'd loose a lot of support if they just killed everyone. There are a lot of people who don't care about the NPCs and/or aren't affected by the HD. They would be pissed at being killed on account of someone else's problems. Companies, even big ones, don't like taking risks. It's all about making money.
Is it that hard to believe she never watched her brother pee?
Because most people with siblings of the other gender know how the opposite gender goes to the toilet? It's not necessary to see them using the bathroom to figure it out, but it's general knowledge you acquire as you get older. If not in your own home but by reading books or school.