I’m actually going to say that we don’t have enough information to give OP a good sense of her daughter’s competitiveness. It is completely impossible to judge a candidate on a skeleton of information tossed into a thread by her mother.
First of all, @pudgesciencemom, one of the reasons that you might be here and not your daughter is that she may be aware that “chancing” people for PhD admissions is kind of useless. Graduate admissions are holistic. They’re not based primarily on status and extracurriculars like in undergrad; rather, the fit with the department and its professors’ research activities is very important. The quality of her research experience, the quality of her letters of recommendation, how she tells her story in her statement of purpose - all those are more important than her GPA and GRE scores. We don’t have enough information on any of that to assuage you (and really, it’s hard even for students to come here and give enough information to get feedback).
You said she had a job as an undergraduate researcher, but without more detail (that can really only be provided by her, and really only understood by life sciences researchers) it’s really not possible for any of us to say that she isn’t competitive or should wait a year or whatever. Please do not go and badger your daughter based on what random people in this thread say! Fruit flies are a very common biological model. Generally speaking competitive candidates have ~2 years of research experience in undergraduate, and usually 1-2 summer research experiences in the summers of their undergrad.
A 3.5 GPA is totally fine. It’s not the highest GPA they’ll see, but it shouldn’t hold her back from admission in and of itself. It also depends on the program, but I strongly disagree that overall GPA is less important than the GRE. Graduate professors in general care a lot more how you performed in academic classes than about how you performed on a 3-hour test. In my experience, the GRE is one of the least important aspects of the package.
If your daughter told you that schools are waiving the GRE, you should believe her. She owns her own admissions process, and she’s the one who bears the brunt of being right or wrong. Incidentally, it happens she’s right - taking the GRE is dangerous in a pandemic, and many programs have waived the GRE requirements for this year’s admissions cycle in recognition of that.
Why is it a shame that your daughter spent three years doing something that she presumably loved and enjoyed? What a boring life we would live if we only did things that had to do with our (future) careers! I have a PhD and I did all kinds of interesting things in college that theoretically had ‘nothing’ to do with my future career. I currently have a (great) job and I also do all kinds of interesting things when I am not at work, including continuations of things I did in college. College isn’t a vocational program designed to shuffle her down an assembly line to a Successful Career; it’s a time to prepare her for her future in many senses: her career, her personal and social life, her participation in a (hopefully) democratic society. (Pragmatically speaking, professors in graduate programs don’t really care if you had non-scientific extracurriculars. They don’t help, but they don’t hurt either.)
Moreover, theater teaches one to be comfortable speaking/performing in front of a lot of others; to work together on a team to accomplish something; to practice something until one perfects it; to understand nuance and meaning. Those are all things that can make one a dynamic speaker and teacher, both of which are things your daughter will have to do in her PhD program.
I wouldn’t recommend that she re-evaluate her career plans or that she wait a year, and I certainly wouldn’t assert that she’s going to get her heart broken. As a counterexample I got my PhD at an Ivy and I had a 3.4 GPA and “a job as an undergraduate researcher where I studied HIV, although lord knows what exactly I was doing with it.” I also had other stuff that my mom would not possibly be able to accurately describe, though I do love her very much. I chose to only apply to top-tier schools because I would’ve rather gone to do something else than gotten a graduate degree at a non-top-tier school (a lower-tier school would not have been useful for what I wanted to do). I wouldn’t have gotten my heart broken if I hadn’t gotten in; I would’ve just done something else. For all we know, this is how this young woman feels, too.
We simply don’t have enough information to recommend…anything, really, especially when the recommendation is not to the applicant herself. Moreover, I’m assuming that this young woman is at least 21 years old and has biology professors that can serve as mentors and advisors for her. Therefore, my recommendation is that you trust her to handle her own career from here on out, and relegate yourself to only providing support if she asks for it.