She makes very sexual comments, goes up very close to smell him, picks lint off of him, stands too close, and it makes working difficult because there are not very many of us and we do have to work together all day long.
This feels to me like it's teetering on the brink of a hostile work environment.

The other thing I thought of is - don't let her be alone with him (within reason, of course), so that she can't falsely accuse him of anything. Any time they're chatting, someone else is observing (or at least listening). I like the idea of firmly re-directing the conversation to her fiancé when the conversation goes in that direction.