Hi Amy!
What do you use to wash her hair? By chance is it J&J Head to Toe body wash & Shampoo? If yes, this could be the problem.
We used this without incident on my first daughter. However, on my youngest, who has bad skin irritations, cradle cap never went away. It wasn't until we went for a check up and the nurse saw her head and asked if we were using the J&J Head to Toe. I said yes, and she recommended that I change to at least the J&J shampoo for her hair and the body wash for her body. Since then, we haven't had any issues and it did clear up right away.
Good Luck!!
K.