How are we to get a new POA if she is incapacitated and not able to know what she is signing?

The WI law states the witness form should say "I am at least 18 years of age, am not related to the principal by blood, marriage, domestic partnership, or adoption, and am not directly financially responsible for the principal's health care."
If it doesn't say this, you used the wrong form. At this point you will have to pursue Guardian/Conservator status via petition to the court.

You can't. A person must be competent to assign a POA.

That seems like a very peculiar law, if it is in fact a law. Have you researched it online?

What does the hospital want you to do now? My mother never signed a POA. The hospital just wanted someone, anyone, to be responsible for her. Who we picked among ourselves didn't matter to them.