It's no more "okay" to inbreed birds than dogs or cats. It is done- that is how new mutations and such are formed. Usually only long-time breeders do this, because it does take a lot of knowledge and husbandry to do it successfully, and without simply getting a bunch of deformed/compromised birds.
What you could do is buy some fake eggs, and replace the ones she lays with these. That way, she can sit all she wants and nothing will come of it. Some people take the eggs that are laid, and boil them, and give them back.
As well, go ahead and do all the regular things to discourage breeding. Lower the light levels to 10 hours or so a day, rearrange the cage frequently, don't give nesting materials (which you had said you've already done) and such.
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