If you know enough about her interests to do something like a rocking chair or Adirondack chair, great - have the kids sign the BACK of it. Planting a garden in her home is great if that's along with her interests. You could have a ceremony and plant a tree in her honor at the school - have a plaque made that hangs on the tree or goes in the ground that says "In honor of Jane Smith from her grateful students..." or something similar, plus the dates of her service. The kids could participate in digging the hole or filling it - sometimes a local nursery/tree service or the town's Parks Dept. will assist since she's a town employee.
A scrapbook from current and former students is nice if you have time to organize it. It's a lot of work to assemble but if you have some creative parents, it could be done.
Our town does a graduation project where the parents supply a baby picture and a grad picture of their kids, and then they are hung up in a "then and now" display. You could do something like that for her to see current and former students, but then it would have to be organized into a book or taken home by parents - you can't expect her to display it.
A vacation home week sounds like a great idea, or money toward a trip. I would not do champagne - I don't think it's appropriate from 2nd graders. It's also not a lasting memory!
Some schools do a quilt - each kid does a square on muslin and them some crafty talented parent stitches it together with a border & backing. The muslin squares are pre-cut and then placed on a sheet of cardboard, edges taped to the back. Kids are given fabric markers and parents get instructions on what to do. They can do them at home so the teacher doesn't know, or there could be a parent meeting after school to discuss/review. To even out the number of squares, have some extras that can include her name, the date of retirement, the words "thank you" or her classic sayings, and so on. Some schools display them for different purposes (like honoring the teacher) but the teacher could take it home as a throw for those chilly winter nights when she can be warmed by the memories of her last class.