Most selective colleges recommend (not require) that applicants have completed 4 years of a foreign language, so she’s hit that mark – because French IV counts as the fourth year, even if she’s only had three years of French in HS. She could take the equivalent of French V at a local college, or she could self-study for the AP (I don’t necessarily recommend self-study, but it’s an option). She can also make a note on her application (or ask her counselor to do so, which might be more appropriate) indicating that she would have stuck with French if she could have, but there was a conflict. That sort of thing happens all the time. Schedules are limiting, and HS students have to make choices.
Not every LAC requires a foreign language (though they usually do for study abroad in non-English-speaking countries). Those that do require it might require two semesters of a language regardless of level – in other words, your HS credits might bump you up a level or two, but you still have to take two semesters (or whatever the requirement is). There is often a range of possible language placements depending on how many HS courses the student has completed, along with other factors. So, depending on whether a student has had 1 or 2 years, or 5 years plus a qualifying AP score and an immersive experience, or anything in between, there will be a suggested starting place.
In other words, I wouldn’t worry about this too much. It’s unlikely to affect admissions, and it may not even affect the language requirement (depending upon where she attends).