"This is not fraternising. This is not an illicit sexual relationship between two young people across the ranks. This is something quite different."
Mrs Foster said the evidence may have uncovered a "culture" of sexual abuse.
"This new material gives a sinister and very different slant involving the pressure of third parties on persons to have sexual intercourse or other relations against their will," she said.
"This gives a climate or culture that can promote desperation and desperate emotions and matters highly relevant to her state of mind, and the culture in which such matters could continue."
Mrs Foster also told the coroner that she would present evidence of "manipulation within the chain of command" at the new inquest.
She also referred to a system of "pimping" or prostitution.
Pte James, 18, from Llangollen in North Wales, was found with a bullet wound to her head in November 1995 when she was undergoing initial training at the Surrey barracks.
She had been posted, alone and armed with an SA80 rifle, to guard a gate known as A2 at Royal Way on November 27, 1995.
She was found at about 8.30am close to the gate in a small wooded area surrounded by trees, with a bullet wound to the front of her head and no other signs of injury.
She was one of four soldiers who died at the barracks between 1995 and 2002 amid claims of bullying and abuse.
After the open verdict at the initial inquest - hurriedly held only three weeks after Pte James's death and lasting just one hour - the Ministry of Defence and police were accused of a cover-up.
A second inquest was ordered into Pte James's death after High Court judges quashed an open verdict recorded in December 1995.
Coroner Brian Barker QC said he would make a written ruling on whether to include the new material.
Pte James's parents, Des and Doreen James, have refused to accept the theory that their daughter committed suicide using her own rifle and have battled for 20 years for the truth surrounding her death.
At a previous pre-inquest hearing in December Mr Barker heard that the MoD would miss its deadline to disclose all relevant documents to the coroner before Christmas.
Mrs Foster blasted the MoD for the "disappointing" delays, saying the family had received precious little in terms of disclosure over the past year.
"It is 20 years ago, really almost to the day, that Cheryl died and to the first inquest," she said. "The family had almost no access to information to speak of and it is with regret that we feel that that might be felt at the moment about where we are here.
"We come before you as really very disappointed people."
- Daily Mail