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I’d be grateful if anyone has experience of this, please:

I’m a UK national, left UK 7 years ago to marry my Turkish wife and have lived together in Turkey for 7 years. We now want to settle in the UK and we will be travelling there together. I gather from the UK Borders Agency website (extract below) that she can be granted permission to live in the UK permanently as soon as she arrives in UK.

Is this permission granted while we are still in Turkey? If so, how does she “demonstrate sufficient knowledge of the English Language and about life in the United Kingdomâ€

Usually by a visit, take the test and return, then apply for ILE.

You are aware that she won't be given 'automatic entry'? You'll need to apply on form VAF4a for a spouse settlement visa - £585.00
If she doesn't pass the KOL test before applying (as Wanderer has suggested), she will be issued with ILE (KOL req)...which will mean once she has passed the Life in the UK test after entering the UK to settle, she would have to then apply for ILR (from within the UK). Applications made in person for ILR are currently £1020...in addition to the initial £585.00.
For her settlement visa you will need to show:
You are able to support yourselves financially without claiming Public Funds
You have suitable accomodation available on arrival in the UK
The relationship is genuine (which should be easy for you).

Thank you both for your replies. Casa thank you for your careful and detailed reply.

So if I follow Wanderer's suggestion, my wife would visit UK, pass the test and then back in Turkey apply for ILE. Armed with that, once we have arrived to live in England does she have to apply for IRL or is ILE treated as IRL?

Side question, if I may: do I as a UK National with Right of Abode have to do anything formal to declare that I'm returning to settle?

If your wife passes the Life test on a visit and is then issued with ILE, she won't then have to apply for a further visa in the UK...so much the cheaper and simpler option. ILE is the equivalent of ILR. ILE = issued outside of the UK. ILR = issued within the UK
You don't have to formally notify the authorities of your return.
For the Life in the UK test, your wife will only need to study chapters 2-6.
24 questions (multiple choice)...pass mark 18

Thank you for all your explanations Clara, much appreciated.

I've just worked through half a dozen on-line tests just out of interest and failed 4 out of 6 of them! Perhaps I should study too!