Translation:She is my older sister.
I've never been thought to use "かのじょ" like this but rather that it is used to refer to ones girlfriend. The sentence in question I think my teacher would mark as wrong or partially wrong (because of this). I would say "あの人は...." insted. I also cant remember anyone talking like that about their families from when I was in Japan
女 (おんな) is woman that woman would be written as あの女.
女の子 (おんなのこ) is girl, so that girl would be あの女の子.
あの is used to refer to that thing/person but it must be followed by a noun or pronoun. I can't remember if we have gotten there already in this course, so figured I should say it.
She is かのじょ. That seems to not be used often as just she but most of the time seems like its used when someone talks about their girlfriend, not sure the reason, but that does seem to be the more common use, but the word itself doesn't mean girlfriend it just is implied.
What I have heard is that if you know someone you should refer to them by name if you don't know their name then you say that person, that man, that woman, and if you are using a pronoun then it implies you have a close relationship with the person, like how you don't typically say anata.
Well, I believe there are multiple ways to do so. If the person's name has already been brought into conversation, you can say 私の彼女です。
You seem to be focused on the kind of nebulous "she", though, which is good, because it prepares you for the world of nebulous language that is japanese.
So you could also just say 彼女です or if you know the name of the person (which you hopefully do, in this context) you could say [名前]は私の彼女です。
Hope that helped some.