1. She said to me that she was waiting for Tom.

2. She told me that she was waiting for Tom.
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Is #1 incorrect?

Both sentences are correct.

no

No, sentence #1 is not incorrect. Both sentences #1 and #2 are grammatically correct and convey the same meaning. The only difference is the choice of the reporting verb. In sentence #1, "said to" is used as the reporting verb, while in sentence #2, "told" is used. Both reporting verbs are commonly used for indirect speech to introduce someone's statement or words.