1. That must be done as a return of $1,250 of the $2,602 contribution for 2021 that remains.
2. Sounds good. (If Vanguard for some reason declines to accept the rollover because they for some reason associate it with the original intent for the $1,250 to eliminate the excess from 2020, your daughter can always roll the $1,250 to an IRA at a different IRA custodian.)
1 and 2 can be done together if it doesn't confuse the Vanguard rep. Confusion could lead to something being mishandled and some sorts of transactions can't really be undone if done wrong. The rollover of the $1,250 March 4, 2022 distribution means that your daughter will not be able to roll over any other distribution made before March 4, 2023 (although with all of this resolved it seems that there will be no need to do such a rollover).
The $1,250 distribution on March 4 was just a regular distribution, no earnings involved. The rolling over the entire distribution would deposit $1,250 back into the Roth IRA.
For the separate return of $1,250 of the 2021 contribution, the amount that is distributed will be adjusted for investment gain or loss while that portion of the 2021 contribution was in the account.
The end result is to be as if your daughter had originally just requested a return of $3,398 + $1,250 = $4,648 of the 2021 contribution (and no other distribution), ignoring the slight difference in attributable income because of the differing date of the return of the $1,250.
I assume that your daughter is still a full-time student (defined as some portion of each of 5 calendar months of the year), so would not be eligible for the Retirement Savings Contributions Credit.
