If the elderly lady was genuinely unable to stand for the 20 minutes (IIRC) prescribed in the Southern Passenger Charter as the maximum reasonable standing time, and was honest with the RPI and explained the situation politely, then I would have expected the RPI to take the overall situation with the seating into account and not issue a PF if there were no readily available Standard Class seats. I would be very disappointed if I saw this happen and would be sure to make a note of the RPI's details (as permitted in the Penalty Fares Rules) and the train/location details, then contact Southern.
If you know which train you were on and can be sure about the overall circumstances, I would contact Southern and insist on a timely response and investigation. If they persist in querying whether or not the lady was able to stand, I would direct them to try to make medical enquiries with the person's doctor (if they are able to do this in accordance with the DPA, etc.).
Lastly, it's not just those who sit in the Priority Seats who should be chivalrous and offer their seats, and I am disappointed in the fact that no Standard Class passengers acted on the situation (come on, not everyone is asleep, facing the wrong way, or reading a complicated document!) but nonetheless, given the high number of Priority Seats on a 377, I cannot honestly believe that not one single occupant of one was able to give up their seat.