K. - I was and still am a nail biter, especially when stressed. Your daughter's nails are something she has control over, when it sounds like she is worried about other areas over which she has no control. I'm not so sure about the hypnotherapy option. My suggestion is to take some time with her and share some of your stressful situations to help her understand that being worried about something is absolutely normal. Your sharing may also bring the two of you closer and allow her to open up more about exactly what is stressing her about 2nd grade. (I don't think that you are over-thinking this aspect at all.) Above all, let her know that you care deeply about how she is feeling and how the nail-biting is hurting her fingers and you want to help her.
The nail painting idea sounds like another great opportunity to help her and have some bonding time for the two of you. You could do it yourself, or, as a special treat, go to a nail salon. They can do all kinds of cute things on her nails.
Sympathy, I think, is the best way to approach this situation with your daughter. Making it a power struggle only ends in both of you losing, with her more stressed and you stressed as well.
I wish you well in helping your daughter overcome this situation!