Recommendation Letter v.s. Ph.D. opportunity Last year, I started collaborating with a high-level professor in the field in a good but not the best institute. Before leaving there, I discussed with her a possible opportunity to having her recommendation letter. Also, I asked about the possible opportunity to becoming her Ph.D. student. She seemed okay about this, however, she told me there will be an interview. 

Now, I want to send an email to her letting her know that I want to be considered as her potential graduate student while having her recommendation letter because I do not know yet what options I will have. Her recommendation letter will really help me, but I do not want to lose the chance to be considered as her potential graduate student. 

I worry that my asking her for a letter of recommendation, while at the same time asking to be considered for admission as her own graduate student, might look like I am too ambitious! How does it sound to a professor? What are the possible reaction of a natural professor to this? Is it mature and rational to send such an email? If I were the professor, I will definitely realize the student is looking for as many opportunities as feasible, however, I may not consider him as a potential student. Please help me to clarify my thoughts on this point.
It is extremely common in my experience to ask a professor for a letter of recommendation while at the same time expressing interest in pursuing further work with that same said professor. I did it myself.
Professors realize that they might not be your only option. Placing their students in graduate programs (where ever they may be) always reflects positively on them.
You have actually done much of the hard work already. You have already talked with this professor about your future plans and sought to gauge her opinion on your becoming her student. If she seemed at all open to taking you on as a student, she will also be open to writing you a letter of recommendation.
I would say something like the following:

Hi Professor McGonagall,
You and I spoke briefly last year about some of my plans for graduate school. I am applying to several programs and I am in hopes that I could obtain a letter of recommendation from you. As one of my options, I am planning on applying to the program at [your university], with you as my potential advisor. Is there a time we could meet to discuss these items further? I am available any time next week on Wednesday or Thursday.
Thank you,
mathvc_

Any reasonable professor would be happy to discuss bringing you on as a graduate student and writing you a letter of recommendation for other options as well. My master's advisor did so for me; I have also done so for my own students. If this professor tells you that she will only write you a letter for her own program and is offended that you would look at other options, you do not want her as your advisor. It would be very worrisome to me if advisor was only willing to take me on as a student if I applied to no other programs. It signals an advisor who is a controlling advisor.