Hi!
It'd be totally fine to say to her what you've said here :
Quote From a_bone_to_pick:
I was hoping she'd give me some guidance on what sort of things are worth doing, maybe a few new papers demonstrating the current limits of knowledge in the field and direction research is going (as well as pitfalls/groups just about to publish etc). I don't know loads about the latest research in field, but I'm interested in it
So, some supervisors have a project idea that they want a student to do. Some students come up with their own. If you would prefer the former then it might be a good idea to ask around the department and find a supervisor like this. The one you've already spoken with could potentially be a cosupervisor. Or, if you are OK with the former, then it'll be a case of you coming up with an idea and discussing that with her. She should be able to give you some guidance on reading and developing your idea. But yeh, you need to establish what specific things you might be interested in doing, read up a little more on them, and see what things might be interesting and novel to address.
Re the grants part. That's a separate issue really. And I remember how confusing that was at the time. Basically yes if you do this, you need to check out what she's sent you and apply for funding. If you do the other thing I suggested above, where the supervisor has a project and is looking for a student, they often have already identified the grant or award, and they put you and the project forward for the funding (so it is supervisor led rather than student led - you still attend the interviews etc but you apply to the supervisor in the first instance and then you go from there together). Not sure if I've explained this well but hope it helps.