I can't imagine it would do the baby any harm. Certainly don't just stop breastfeeding untill you've consulted a doctor.
Ok- i've just done a quick search and found the following..
Leona dang-kildoff, rn, mcn, cde
june 1996
I often hear women with diabetes say they can't breast feed, but the truth is many health care professionals feel women should-because of their diabetes. Breast feeding is thought to decrease the autoimmune process that attacks the pancreas and causes diabetes, and may reduce your child's chances of getting diabetes.
Breast feeding can have an impact on all types of diabetes. Recent research shows declined rates of diabetes in breast-fed offspring of women with type I diabetes. Breast feeding also appears to reduce the incidence of gestational diabetes for daughters of women who were gestational themselves.
A third way breast feeding can impact diabetes is by reducing the chances of developing type 2 diabetes in women who had gestational diabetes. In order to reap these benefits, women should try to breast feed for at least three months, and some studies out of finland suggest breast feeding for up to a year.
In addition, women who breast feed will generally see fewer illnesses in their children, especially ear infections.
The article goes on to say that some medications could be harmfull to the baby, and als that diabetes needs to be carefully managed while breastfeeding (mostly fo the mother's sake).
So, definately get some advice from your doctor, but it should be ok for your wife to breastfeed in the meantime- if that's what she wants to do.