She should be able to get both passports -- that's what I did. The passport is just a document saying you're a citizen of the issuing country. Since she's a US citizen by birth, she can have a US passport. If she was registered with the the consulate of whatever nation her parents are from (and her parents are going back to live in that country), then she's also a citizen of that country, albeit born abroad, and can therefore have that passport, as well. On my trip to Costa Rica in February, I used my US passport while on US soil, and my Canadian passport all the rest of the time.