Aside from the valid points already being made about how much is being asked for a 17 year old and whether you'll end up with 2 retirees on your hand. You don't mention how old your DD is, but I think 2 horses on DIY livery is a lot for a teenager or young adult to manage, at a time in her life when she'll likely have a lot on. I don't mean in the sense of 'oh she'll lose interest in horses when she discovers boys' (urgh, hate it when people say that), but more she may have exams, uni/college applications, a saturday job, a social life, other hobbies, and yes maybe a boy or girlfriend as well (!) to take up her time. I know it's horrible to see her so upset about giving up her loan horse but it sounds as though the intention was never to have 2, and so the decision about 'Jack' was effectively made when you bought 'Jim'?
Unless she is very serious about horses being her career and therefore literally everything else must come second, I think you might need to put your foot down about ensuring she has some balance in her life. Even if you are prepared to take on a substantial part of the care yourself (which is a lot to ask if you don't ride), giving 2 enough exercise to make it worthwhile is going to be a 10-12 hour commitment a week, does she really have that time/inclination in the depths of winter alongside school/college/work and everything else?
Appreciate she loves the horse and isn't being a spoilt brat but nonetheless she doesn't get to just cry and cry until you agree she can have 2 horses, life doesn't work that way. Unfortunately being a rider/owner does teach you that sometimes you need to let a horse that isn't right for you go, and if she wants to be a pro rider or yard manager someday, then dealing with the fact that you won't own all your rides/horses yourself and their owners can do what they want with them (including selling them on) is another hard but valuable lesson... (don't think I am being hard hearted by the way, I cried for a week when my loan pony as a teenager was sold on, begged and begged my poor parents to buy him for me, the works, so I know how she feels!)
I suppose if you really love 'Jack' and are genuinely concerned about his welfare if sold, you could buy him and find a sharer or loaner to take on the majority of his keep costs, care and exercise? I am not sure of his worth, if he can really do all the AM moves, is currently sound and a true dressage schoolmaster then maybe he's worth £4k with the saddle (although bear in mind saddles aren't worth as much second hand as new even in good nick) - but I don't think you would see much if any return on your capital and I'm not sure I'd trust the idea that the old owner would buy him back for any substantial value if he breaks down or has to be retired which is a distinct possibility for any horse of 17 who's had a hard life!
Good luck, hope you sort it.