“I don’t think non-ED schools are allowed to require acceptance by May 1st…and that includes those with merit
offers.”
This is a gray area. The school is requiring her to accept the scholarship. They are not taking her offer of admissions off the table, but taking the offer of the scholarship off the table. I can understand why they want to do that with a merit scholarship. The school wants to be able to offer it to entice another desirable student if your daughter declines it. If she waits until April, those prospective students may have committed to other schools.
It’s a tough spot to be in. She can always withdraw after committing, since there is no way the school can force her to attend. You would lose the deposits for admission and housing, but they can’t force you to pay a semester’s tuition.