Prior to the desktop rebuild we had 2.3 2.2 installed so she is carrying on from a save game where she may have been to prison (actually she has been to prison just confirmed - lol she looked at me like she had done something wrong RL, I told her we are trying to solve the follow problem and she says "Oh right yes a few times"), 2.3.1 has been installed before the latest play throughs and after the rebuild of the machine. So possible save game leftover from the previous version?
Edit : Just remembered sorry we never had 2.3 installed, I missed that one modding Fallout3 and we went from 2.2 to 2.3.1
Edit2: The times she went to prison were during Arnora Auria's quest in Bruma, both times to talk to Jorundr.
The isue is not upgrading from 2.2 to 2.3.1 directly. The isue is having been in prison two times in a row in a version prior to 2.3.
The problem with Vilja not following Character, prevents from running (I'm not sure how or why), the AI package that where in use when the character is sent to prison second time in a row (sometimes first time).
2.3 (and 2.3.1) prevents this to happen but didn't fix the problem once manifested.
Now Vilja can't use that AI package but the rest of the packages should work fine.
So, now Vilja can't follow your daughter's character while wearing armor on foot, while not wearing armor on foot, while wearing armor on horse or when not wearing armor on horse.
If she only can follow player in normal clothes, she will equip armor when in combat and fight normally and when the combat ends she will unequip the armor.
This way, Vilja is not Very cripled (the real problem comes if this happens various times), so if your daughter don't want to reload a save previous to this problem, she could continue playing Vilja with the lost of one of the Vilja's folowing modes.
I have had a crazy idea that almost surelly won't work, but who knows. As provably you know, when reloading a save without restarting Oblivion, some artifacts could be added from your previous loaded game, to the actual one. Maybe if you start Oblivion, load a shave previous to this problem and then load the last save, the AI package could be fixed. Then saving the game would make it permanent.