May be this might be helpful for others whose spouse is on student dependent. And they gonna apply their FLRm .
I called HO enquiry beauro and asked couple of questions. Below is the conversation:
Question 1- I got ILR, my wife was on PBS dependent, so what she should apply now?
Answer- She should apply FLR(m) now.
Q2- Can she apply Set(m) as she already spent more than 2.5 years with me on PBS dependent.
Ans- No, she was PBS dependent not the ILR dependent. So she 1st need to apply FLR(m) 1st.
Q3- Is she under old rules (before 9th July 2012) or new rules.
Ans- She comes under new rules. [so i assume we have to wait for 5 years b4 we can apply Set(m)

]
Q4- But she entered UK b4 9th July 2012 back in 2010.
Answer- But she entered as PBS dependent not on settlement dependent visa.
Q5- Her visa will expire in 2014. Now as I m on ILR is her old PBS dependent visa still valid.
Answer: Yes, its valid and she can apply anytime b4 her current visa expires.
Q6- Can I apply in person by PEO.
Ans- Its not a straight forward case so better to apply by post. [My wife ILR dependent application got refused as Lawyer included her as dependent on same Formm Set(O) ]. So she said its not straight forward case now so I will suggest not to go for window appointment.
I wonder if I call again, someone might tell a different story? that my wife comes under old rules and also she can apply Set(m) directly? I really want to hear that.