It sounds like she has reflux, and many (I've heard up to 40%) of babies with reflux also have food allergies, such as an allergy to dairy. My son has/had both, and so this is my advice from my experience (outgrew the reflux, still has the allergy).
For the reflux - she will spit up everything until she outgrows it. Reflux means that the muscle at the top of her stomach that holds food down isn't strong enough yet, and so anything she eats can come back up - milk, watermelon, even water. The best bet is to feed her smaller meals more frequently, because bigger meals just mean bigger spitups (half as much food, twice as often is the advice I was given). The meds will help reduce the pain of the reflux for her, so she'll be happier and sleep better. But it doesn't do anything for the spit up, in my experience. You just need to wait for her to outgrow the spitup. For my son, this was around 14 months.
For the likely dairy allergy - like I said, common in reflux babies. For 'milk', I give my son Nutramigen formula made by Enfamil (it is totally free of milk proteins and so is alimentum made by similac; some of the other ones marketed for sensitive tummies are not milk free so be careful of labelling). My son also likes rice milk to drink. If you are concerned with weight gain, you might want to stick with the nutramigen. It is higher calorie than rice milk. For butter, there is one brand that I've found that is completely milk-free (Earth Balance). I use these (the rice milk instead of cow's milk, and the soy butter instead of regular butter or margarine) in all my baking and cooking, and on my baby's food. Other higher calorie foods my ped recommended that have worked for us: scrambled eggs with extra yolks (made with rice milk or no milk at all), ground beef, diced chicken, and avacado. There is also a soy yogurt that my son likes (called O'Soy I think). All these things are easily found at any bigger grocery store.
There are also cow's milk free cheeses, but they are harder to find. In my area (Pittsburgh), I've only found them at Whole Foods. If you have a Whole Foods or other specialty grocery store around, you could go that route too, to add soy cheese to her diet.
It is a lot to adapt to at the beginning, but it is worth it to have a happy pain-free baby. And once you know where to find what you need in the grocery store, it becomes easier. Good luck and feel free to ask me any other questions you have.