Congrats to your daughter for being nominated a Jefferson Scholar. That is a great honor. The scholarship itself is viewed completely separate from admissions and is handled by the Jefferson Scholars Foundation. OOS is a tough admit at UVA for sure but no reason not to try.
Certainly have her pursue the scholarship. It’s a very cool experience. S went through that a few years ago and although he didn’t get the scholarship, it was great practice for interviewing with accomplished adults. Depending on the size of your region, they will invite certain nominees to a mixer and an interview. Typically one student moves on, so the best of the best, per the foundation, in your region.
Congratulations and best of luck.