Joppa, my wife is American, with a UK spouse visa am I correct that she would pay international rate tuition fees and after 3 years of permanent residence be eligible for local rate fees?Depends on the institution and the course. Highest is MBA which can be £30,000 or more. I'd say average is around £12k to £18k. Look up university website, go to postgraduate studies and look for international student fees. Each university sets its own fees.
So after 3 years will my wife have 'settled' status or does that take 5 years from arrival?Your wife needs to have lived in UK for 3 years and have settled status before eligible for home student fees. For you, you too need three years' residence but you already have settled status as British citizen. Remember the difference may be only around £3,000 or so depending on course and institution.