Hello again.
Schools are permitted to give priority to children who have attended the attached nursery - although very many don't. The School Admissions Code (available here) says:
Primary schools with attached nursery class
2.66 Where schools have a nursery class attached, separate admission arrangements must be published for entry to the nursery. The provisions of this Code do not apply to nursery classes. Published admission arrangements must make clear to parents that their child?s attendance at the nursery class does not guarantee admission to the school for primary education, and that a separate application must be made for transfer from nursery to primary school (as it must for transfers from infant to junior schools).
2.67 Admission authorities that propose to give priority to children who attend the nursery or the co-located children?s centre for nursery provision should ensure that families that live nearer the school, those who choose to take up other nursery options or the free entitlement at an alternative local provider, or those who have recently moved to the area, are not unfairly disadvantaged compared to other families.
Likewise, the Parents' Guide says that "Schools can prioritise children at attached nurseries, but they should make it clear to you that attending a particular nursery does not necessarily guarantee children a place at the school".
So, the school has not done anything wrong by giving priority to children who have attended the nursery, but the question then arises of whether they have complied with para 2.67 of the Code, ie not disadvantaging others who live nearer the school and/or attended other nurseries. If she lives literally opposite the school gate and still didn't get a place it does suggest that there's at least an argument to be had that she has been disadvantaged and the admission arrangements don't comply with the Code.
It might be worth her asking the school now for a statement on what they do to ensure that the priority for children who attended the nursery does not disadvantage others - what safeguards are there? If they cannot identify any safeguards, she can present that at the appeal to argue that the admission arrangements are not compliant with the Code.
It's hard to predict what the panel might make of it.