She is grieving for James, but perhaps their marriage wasn't the one you're thinking of from the books, but something totally different.  Perhaps he wasn't her one great love after all.  She was crying in Sev's arms after all, but her emotions are very fragmented.  She has recieved one shock after another and isn't reacting perhaps as a normal person would. She looks at Severus differently because he is the last link she has to both past and present and though she is admiring him as man, she is not at the moment ready for a romantic relationship with him.  However, one can admire a man and not jump immediately into a relationship with him. Think of it as if Lily left for ten years and then returned to Britain and the old friend she left behind has suddenly become someone very handsome, she would definitely notice it. 

Petunia and Lily didn't have a good relationship at all, they broke apart from each other when Lily chose the magical world and Petunia the Muggle world.  Petunia hated Lily for her decision and wanted nothing further to do with her, and Lily accepted that, though she regretted it.  Lily might have loved her once, as children, but Petunia's nasty and spiteful attitude has since turned Lily away from her, and so there is little love between them.  Just because they are blood does not mean they have to love each other, I have known many sisters who hated each other's guts and couldn't stand the sight of each other, and once Lily discovers what her sister did to Harry she will probably hate her, since Petunia had no reason to do what she did to her nephew.  Lily feels guilty because she knows she SHOULD love her sister, but Petunia has done and said things to her and about her child that make that impossible.  Consider the fact that Petunia wouldn't even come and see her newborn nephew, telling his mother that they didn't want to see a freakish anomaly, not even acknowledging baby Harry as a person.  Would that be something you could forgive a sibling for saying or doing to you? I know I could not, and Lily is not a saint.  The Dursleys in canon prove time and again that they are heartless and cold people who care for nothing save themselves and their status quo.  Other things were said as well, which have not been mentioned yet, that further soured Lily on her relationship with her sister, which is why she never named Petunia as a possible guardian in her will.

And this is an AU story, which means the characters, due to different life paths, choices, and so forth, have different attitudes and personalities.  Severus not being a spy, dark wizard, or otherwise involved with DE has become a different man, he is not bitter and angry, but he still has his sarcastic side and he still loves Lily.  Whether or not Lily will grow to love him is another matter. This Severus has hope where canon Snape had nothing. Canon Snape had regrets because Lily died, but here she lived and that makes a huge difference in everyone's lives.