Sure. Since the return was rejected you can make any changes you want and then resubmit.  As an aside, if the children lived with her she would have the right to claim them in which case you could mail her return with the children as her dependents and let the IRS sort it out. 

You can also remove the children from the return and e-file if she will get a refund.  Then amend the retiurn, when amend is available in TurboTax late in March.

On the amended return add back the children and credits that she is eligible for.  Then print the amended return, have her sign and date it, and prepare a letter to the IRS explaining that someone else clamed the children as dependents.

The IRS will sort it out, but it will probably take some time for them to get to it.

Also apply for identify protection pins for your daughter and her children.  Then no one else will be able to use their social security number to file a return.

IRS IP PIN