The usual caveat applies here that decisions are made by small groups of subject tutors based in colleges, working within centrally agreed policies and guidelines. I'm given my in good faith advice based on 15 years of experience at three colleges.
I think our current wording is "The usual expectation is that candidates will complete the A-levels specified in their applications within a two year period." We have a number of applications from students on gap years each year. Most have their AAA or better, but occasionally a few are retaking have dropped a grade in one subject for some reason despite doing well in the other two, and are retaking and reapplying in order to meet the AAA requirement. Their personal statement and their reference usually explain some extenuating circumstances for the dropped grade. We've certainly admitted at least one recent candidate who retook his third A-level the year after the other two to move it from a B to an A, but there were mitigating circumstances and he did achieve the A.
That being said, he was a candidate with a lot of potential from a non-traditional background with clear mitigating circumstances, who did very well on our ELAT and sent very strong written work. Though the "usual expectation" is AAA in two years, there are a few candidates who will not fit this pattern. We have some flexibility to be able to take account of circumstances outside of a candidate's control, as we are balancing potential against achievement. IF she is good enough (i.e. excellent GCSEs (in context), excellent ELAT (ditto), strong written work (ditto), strong personal statement and references), and there were mitigating circumstances relating to the dropped grade and if she were committed to meeting the offer, then she would be under consideration alongside the rest of our very able applicants. That's no guarantee of anything, but she would be under consideration.
As to Art v another subject, it's hard to be definitive here. On the one hand Art complements her Foundation course and would perhaps make more sense to us (she's someone who loves both literature and art), but I take the point that it has some differences from other A-levels and it might be harder to work her way up to an A or A*. But the idea that she could get an A in one year from scratch in another subject seems less likely and might seem risky from our point of view? Realistically, either way would be a long shot, but neither are impossible for an Oxford English application, particularly if there were mitigating school factors, given that she has done very well for English and the EPQ.
All the advice to get to the September Open Day if possible and talk to tutors and tutors for admissions is spot on. She'll be able to get detailed advice about what her best course of action is, though I suspect much of the advice will be of the 'not impossible but not usual' variety. It is frustrating/confusing, I know, that we don't have absolutes here, but we need some flexibility to allow for unconventional routes in, while still giving generally applicable 'usual expectations. HTH.