Rachel was mentally and emotionally unstable, and Lillian was very ill, so Lionel decided that the best thing to do was to place Lucas with a suitable family and place Rachel in the psychiatric ward of Dr. Friedberg's clinic. She was there for seven years (c. 1985-1993).
In 2002 (about nine years later), she came to Smallville believing that Clark Kent was Lucas. Thanks to Chloe's past research into Clark's adoption as part of a school project, she discovered that Metropolis United Charities which she believed handled Lucas' adoption, only handled one adoption- Clark Kent's. Chloe posted a few notices on adoption websites to see if she could get a few hits while attempting to find information about Clark's biological parents- despite the fact that Clark had asked her to stop, knowing that she would find nothing while claiming that he didn't want to know whether his biological parents were dead or simply didn't want him-, and she and Rachel exchanged e-mail messages.
Attempting to get Rachel off his back, Clark submitted to a DNA test, but when the results came back negative, she refused to believe them, accusing Lionel of manipulating the results somehow (in reality it was Clark who manipulated the results by breaking into the lab and substituting Pete's DNA in order to conceal his secret). Although she initially claimed that she simply wanted to get to know Clark, without attempting to take anyone's place, her later words hinted at a deep-rooted dislike of Martha Kent, due to her having been present at all the prominent moments of Clark's life instead of her.
She kidnapped Lex in an attempt to force Lionel to publicly acknowledge Clark as their illegitimate son, taking him to the house she'd purchased with Lionel's money. When Lionel refused to meet her demands, Clark had to step in and save Lex- after Chloe helped Clark track down Rachel's house via the clerical records, the house being listed under the name of Lucas Luthor-, finding the house just after Lex had been knocked out and Rachel was coming at him with an axe. After witnessing Clark take the axe to the chest- causing the head to shatter against him-, Rachel's already-fragile mind further shattered when presented with such proof that Clark couldn't be her son, causing her to break down in tears. She was subsequently being taken into custody and sent away to an institution, with Martha concluding that it didn't matter if she told anyone what she'd seen as nobody would believe her.