1. There are a few possible meanings here. One is that "sit up" means she's literally sitting up at the window instead of lying down. Two (and my initial instinct) is that it implies that she moves "up" to sit by the window, meaning that the window is in an elevated position relative to where she usually is. Third is that this is just a colloquial way of saying "sit by the window".
2. We often say "in" the window instead of "by" colloquially. This is especially true if the window sill is deep, so that the person almost "enters" the window space.
My first reaction to this sentence is that it's a colloquial way of saying "sits by the window".