How you present the sentences is mainly a matter of style. All four are understandable.
If you want a strict analysis, none of them are entirely correct.
In the first two sentences (whether or not you use a serial comma is entirely up to your personal preference), there is an issue with ellipsis.
If you don't make it explicit, it's assumed that she is applies to all three items. But doing so results in something ungrammatical:
✘ The reason I like Sarah is because she is kind, (she is) generous and (she is) loves reading books.
A completely explicit grammatical sentence would look like this:
✔ The reason I like Sarah is because she is kind, she is generous and she loves reading books.
Because she applies to all three items, it only needs to be used the first time. But because is doesn't belong with the third item, it, at least, should be provided explicitly with the second item:
✔ The reason I like Sarah is because she is kind, is generous, and loves reading books.
I find this final version—in which the omitted she can be assumed in front of the last two items—to sound odd (and I would prefer the fully explicit version), but it's not technically incorrect upon analysis.
In the third sentence, there are actually two clauses since a comma is not used to separate the first two items, thereby making those a single item and turning the final item into a second clause. (Because a comma followed by a conjunction is also used to separate independent clauses.) But the second clause is ungrammatical.
Breaking it down, it looks like this:
✘ She is kind and generous. Loves reading books.
To fix this, you need to repeat she:
✔ She is kind and generous, and she loves reading books.
Not only does this form a grammatical second clause, but it also prevents applying any assumed ellipsis to the second clause that would make it appear as:
✘ She is kind and generous, and (she is) loves reading books.
The fourth sentence has only a single clause (unlike the third) but it, too, suffers from a problem with ellipsis.
As with the other sentences, the assumed ellipsis results in something ungrammatical:
✘ She is kind and (she is) generous and (she is) loves reading books.
A fully explicit version would be the following:
✔ She is kind and she is generous and she loves reading books.
Since she can be assumed to apply to all three items, it's only is that needs to be explicitly stated in front of the second item:
✔ She is kind and is generous and loves reading books.
However, as with the first two sentences, while this is technically accurate, it sounds a little odd. The fully explicit version would like be a better choice.
Note that the fourth sentence sounds a bit odd no matter how it's corrected. Aside from just adding a comma and turning it into the third sentence, one way of making it—and all of the others—work correctly with a she is ellipsis that doesn't require repeating anything in front of any item is to rephrase it slightly (granted, I am also changing the meaning as I do this):
✔ She is kind and generous and a lover of good books.
This works with the ellipsis because each item is grammatical with she is in front of it:
✔ She is kind and (she is) generous and (she is) a lover of good books.
But strict analysis aside, nobody is going to actually misunderstand any of the sentences as they are written in the question. Which version you settle on (corrected or not) is up to you.
