Your friend may be making a lot of assumptions. A lot of people in my family went to one university (starting with my grandparents because it was local to them and not that expensive). Over the years, a number of people in my family have applied and been accepted, and others have been rejected. We are not wealthy but my parents were regular donors every year (small amounts). The school looks at "loyalty" because those students may be more likely to stay all 4 years because they feel a connection - those kids adjust well and it saves the university the expense of transferring kids out and transferring new kids in. It's better for the students if they are happier.
Many universities consider "legacies" this way - the vast majority are not wealthy and are looking for financial aid, so it's not a "given" that they will be accepted because there's any direct financial benefit to the university. All universities do well if they have strong alumni support, not just financial but in terms of building school spirit at away games and having local pockets of support for orientation and "info nights" across the country.
I have another friend whose always told her son how bright he was, smarter than his teachers, he didn't have to do homework because it was busy work, blah blah. They ignored the guidance counselors' recommendations and only applied to Ivy League schools. The son is very big and played football in a medium sized high school. He skipped 2 grades (because he's "so smart", so when he graduated high school he was barely 17. He was not very mature compared to his classmates. Guess what? He didn't do well on interviews, he showed as immature, and he didn't get into any Ivy League schools at all. They were shocked for about 3 solid months and were paralyzed. He wound up going to the state university because at the last minute they had openings (he missed the deadline for applications so they wouldn't even consider him until very late).
Her daughter is not going to like feeling forced to go to that school, and she's going to be absolutely devastated if she doesn't get in. Besides, what are the girl's interests? What size school is best for her? What type of local (urban, rural, etc.)? Nobody's looking out for her interests.
Your daughter sounds very well rounded. She has lots of activities and good grades. Good colleges aren't just looking for grades - they are looking for mature and independent kids who can mix well with others, have multiple interests, and who can survive outside their parents' view. They do not have to have a declared major - in fact, many schools discourage it and encourage kids to do some exploratory courses during the first 2 years.
I'd just wait and see what happens to your friend's daughter. Don't feel competitive, and don't feel jealous. Your friend has absolutely no idea what she's talking about. She's insecure and she's micromanaging her daughter's future. Ask yourself if you really want your daughter going to a school that truly values legacies over everyone else (my guess is that the school doesn't, but still...)
There is a university out there for every kid who wants to go. I think your daughter should look at a variety of schools - large and comprehensive, small and intimate, urban, suburban, rural. I know she's had her heart set on this school since she was a child, but why? What possible skills did she have then to evaluate the school? Is her desire to go there built on some picture she has in her head? Is that based in reality?? She should go on some tours and get a "feel" for it -- it will either open her eyes to new possibilities, or confirm her existing preference. EIther way, it's a win-win. She should consider a school with a wide range of majors and, in my opinion, an excellent residential life program that gives kids good support in the dorms and really works hard at roommate-matching. We gave my son a 6-hour radius from home (we wanted him to be able to get home without a 6 hour flight but also have a lot of choices). We didn't want him so close that he could come home every weekend - we wanted him to make a life there. We didn't want a commuter school - we wanted him to stay on weekends and have a social life as well as time to study without driving. He was pretty sure he wanted engineering, but we pushed him to go to a university with both a college of eng'g and a college of arts & sciences so he could take other courses, meet lots of different kids, and, if necessary, change majors without changing schools. We wanted him to have a strong residential life program with good Resident Assistants and not just be at a free-for-all party school.
So again, I'd just stop having these conversations with your friend, and concentrate on letting your daughter experience a few schools just to see what's out there. No student should have their heart set on just one school - it's too risky. And her high school career should not be built on being "good enough" for University A without even considering that Universities B, C, and D might just be looking for her.