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If she didn't make grades; she gets cut. That is the rule that prevails. Schools and Nationals make grade rules for a reason--and that reason stands true for any potential member legacy or not.
And I don't know how you got the idea that you could not cut a legacy after Round 1. That's school dependent. When I was rushing, we visited every sorority for Round 1 (called Rainbows) then got 'invited' back to a maximum number of 5 for Invites (Round 2). I was cut by my legacy chapter after Round 2. In general at my school for any chapter, if a legacy makes it to the 3rd round of parties, she's supposed to be on the prefs list, and therefore, the top of the bid list. Some National offices I know push their chapters to always invite back legacies that qualify (that is, have the grades); and some leave that to the chapter.
I definitely know that I made grades for my legacy chapter, as the chapter I pledged had one of the highest requirements for pledging (and my legacy chapter had the lowest), so I got cut for other reasons.
Hope that answers your question!
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