The school probably haven't got much choice about how they tell her, Doin: they have to tell her somehow, and since she's not going to school and not coming home to you, and is staying with someone who doesn't have parental responsibility for her, a letter is probably their only option. Don't worry about it too much.
I'm not sure what will happen if she doesn't go to the special unit. It seems to be different in different areas. Around here, not much happens - the authorities recognise there's not much you can do to force an unwilling 16yo to go to school/college.
Make sure you stay in touch with school - just a call once a week to say "Just letting you know she's still not living at home"... And then they won't hassle you about her non-attendance.
Child Benefit and any Tax Credits for her will stop, so she'll have to find someone who's prepared to support her for free... She may be able to get Income Support (tho 16 yos can't normally, and the rules have changed so I'm not sure) but then she'll have to attend college.
Try not to worry about things you can't control, Doin. You're in a very difficult situation, and you're also v vulnerable... Have you got any RL support at the mo?