Congrats, you are doing a great job! Your daughter is looking at what is right for her and even though it is family, she is learning who the right crowd is. You should be proud of yourself. You have taught her to think for herself.
From my personal experience, I grew up with a cousin close in age. My mother's sister's child. Both my Mother and Aunt shoved my cousin and I together. I was pretty shy and didnt want to be trouble and never told my mother how awful my cousin treated me. I lived in a small house in the city, we didnt get much company because our place was too small (I can relate). My Aunt lived further out in the burbs, a brand new sub with cul de sacs and plenty of kids. At that time, city life was considered a yucky thing. I never told my mother (because I was not confident enough and could see my mom and her sister were really close) that my cousin tortured me every weekend until I turned 12. My Aunt who meant well often gave me her daughter's hand me downs. So my weekends were spent with my cousin and her little friends torturing me all weekend on my clothes, where I lived, where I went to school etc. Sometimes they would ditch me at the park, hide from me, not let me play, or get in the pool, etc.. it was hell. I was their entertainment. I finally told my mother about it all when I was an adult (she couldnt understand why I hated my cousin). She said I should have told her about all the crap I had went through. I don't know if it would have changed really, as people tend to worry too much about what family thinks.
Listen to your daughter, just because they are family doesnt mean its the right crowd.