How much more does a recommendation letter from alumni help in PhD admissions?
I disagree with Damien's answer for the specific case of your question. A graduate of the department, who knows you very well and can write a good letter of recommendation, is worth just as much as the "big name," because she is familiar with the department as it is currently operating, and would be able to place your work in context of people also known in the department. So, for the specific case of applying to a school that is someone else's alma mater, I would say go for it, with a caveat.

That caveat is that if a person is not able of writing a good letter of recommendation, then you shouldn't use it. A bad letter will not help you at all. If you have a career services office or academic counselor who can help you sort through which letters are most suitable for graduate school applications, that will help you make the decision.