You have two issues:
1. Is your daughter a dependent and
2. If she is a dependent, what do you do about that "endless loop".
I will address the second issue first.
On her tax return, you will go through the HSA interview. You will answer that she did not have HDHP coverage (whether she did or not doesn't matter). You will also indicate that she will withdraw the entire excess when TurboTax states that she has excess contributions and asks what you want to do about it.
If she is able to withdraw the entire excess, there will be no penalty, although she will pay income tax on the excess if the excess was part of the code W amount in box 12 on the W-2. This is OK, because when she notifies the HSA custodian for a "withdrawal of excess contributions", the HSA custodian will likely send her a check for that amount (unless her employer grabbed it first - come back and tell us if that happens).
NOTE, she MUST notify the HSA custodian about this withdrawal BEFORE April 15th, preferably several days before).
By going through the HSA interview, this will make the numbers on the form 8889 correct.
Now, let's talk about the Review. In the Review, TurboTax is puzzled why you have an 8889 when you don't show any HDHP coverage, so it asks you to enter Self or Family on line 1 of the 8889.
You can enter either one, I usually say "Self". It won't matter because when you said that you did not have HDHP coverage, the numbers on the 8889 were made correct.
As for your other issue (about being a dependent), please see this IRS page "Dependents". Note especially the "Answer questions to see if you can claim someone as a dependent on your tax return". This takes you to an IRS Interactive Assistant, which will help you make that determination.
Whatever you do, document it, because if you all are ever audited, you will need to show why you considered your daughter a dependent. As you can see, there are many variables relating to this - it is not cut-and-dried. So document for yourself what you decided and why, in case anyone ever asks.
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