It’s a shock but you need to take a step back and both of you carefully consider what your DD has been advised.
I think the University are bending over backwards to do her a favour here. Presumably, what she has managed to submit probably isn’t of a high quality and she knows she could produce better work?
It sounds like a sensible plan for her to stay home with support from you to re-take the year. She’ll be able to focus on her studies and submit new assignments, and they’ll be marked as if they’re a first attempt.
Normally, if a student repeats parts of the course, the repeat units are capped at 40% and added together, that could leave her with a Pass degree or a Third class Honours.
By totally disregarding this years work, the Uni is effectively allowing all her repeat assigments to be classed as a first attempt and therefore, not capped at 40%.
Another student on my course had a bereavement close to the end of the final year exams and was allowed to re-sit the year as a first attempt and she ended up with a First.
If you force them to mark her current work then the course rules wont allow them to ignore those marks. External examiners from other Universities will attend her exam boards to ensure that the rules are properly adhered to.