Austin admitted "causing death by driving without due care while over the legal alcohol limit" at Stafford Crown Court.
But she was spared jail and was sent to a psychiatric hospital after the judge heard she had suffered from depression.
Judge John Maxwell told her: "What you did has caused the loss of a life and it has caused other lives to be ruined.
"The seriousness of it is obvious, and you know that there are guidelines that govern how judges treat cases like this.
"It is a case where you were drowsy, it is a case where you knew you were likely to be drowsy, it is a case where you have not told the truth about how much you had to drink and you nevertheless drove."
Judge Maxwell said he felt a sentence of three years imprisonment would be appropriate, but decided to make an indeterminate hospital order based on psychiatric reports.
She was also banned from driving for five years on her release.
Judge Maxwell added: "The position is that you should not go to prison but that you should be detained in a mental hospital.
"I have considerable reservations about that because you are mentally ill, but I look at the psychological trauma that other people have suffered and I don't know whether the trauma for them makes them mentally ill, probably not, but it is a very severe level of trauma and depression.
"Why should your mental suffering make so much difference to the case?
"You do not deserve leniency, but I feel I really have no alternative but to make a hospital order.
"If I did anything else I think it would be wrong in principle and in making a hospital order I do not in any way detract from the seriousness of what you did."
The court heard witnesses watched in horror as Austin's car veered off the road and hit Mrs Wilson.
Robert Price, prosecuting, said: "A witness noticed that the Audi was travelling up its correct side of the road but didn't appear to be travelling the natural course of road and he believed that there was something wrong with the way in which the car was being manoeuvred.
"It veered from its natural course, headed directly towards the pavement as if it was what the driver intended."
Mrs McFadden, 48, who had been walking with Mrs Wilson, also suffered serious injuries in the crash on August 4 last year.
Andrew Fisher QC, defending, said the defendant had felt drowsy after driving her daughter to a music festival in Ledbury, Herefordshire.
Mr Fisher added that she had been on medication for depression and had recently undergone a three-month spell in a psychiatric hospital.
He said: "We simply submit in this terrible and tragic case that the court should deal with her in the knowledge of her mental health.
"She is ill, and as with any offender before any court they have to be dealt with within the regime that relates to that."
The court heard Mrs Wilson was walking along the A458 Bridgnorth Road in Stourton, south Staffordshire at 10.30am on August 4 last year when she was hit by Austin's car.
The former secondary school headteacher from Kinver, near Kidderminster, Worcs., died of head injuries while her friend survived after injuring her arm.
The judge ordered that Mrs Austin be detained in the plush Woodbourne Priory hospital in Birmingham.
Speaking outside the court, Mrs Wilson's son, Edward Davies said he was disgusted at the sentence.
He said: "This is an absolute disgrace. Three years, that should have been her sentence.
"She's got submissions from two psychiatrists saying that she shouldn't go to prison, we dispute what they're saying.
"I think she should serve the full prison sentence after the doctors let her out, but she'll probably only do a year in the hospital and be let out.
"If you've got money you can pay for expensive psychiatric reports. Money talks.
"Even the judge said his hands were tied."
Mrs Wilson's daughter, Laura Davies, added: "Her selfish and self-centred actions have caused the death of an inspirational person.
"We are in constant pain, we are not really living, we are just existing.
"I had to walk out because I couldn't cope with hearing that she wouldn't go to prison.
"This was the worst case scenario."
Austin, from Claverley, in the West Midlands, married David Julian Charles Austin, the son of David Austin OBE who built up the famous family firm.
Mr Austin senior received the OBE in the Queen's birthday honours list for services to horticulture in June 2007.
The family have made a fortune from overseeing one of the world's largest garden rose breeding programmes in Albrighton, Shrops.
Austin even had a white rose, the result of cross-breeding an old Noisette rose and English variety, named after her, which is called 'Francine Austin (Ausram)'.
It is understood Austin is still married to David but the couple have separated.