Thank you all so much for the reassuring words and advice. I'm happy to report that she's had quite a few good days in a row and we're making a lot of progress. It seems that the key was a "red, yellow, green" card at daycare - red has a sad face, yellow is neutral, and green is happy. If she gets the happy face at the end of each day, she gets a (very small) reward at the end of the day. And it's not actually a reward like a toy - it's just stuff she LOVES (like watching Barney on the iPad) that she is allowed to do. We tried to make it seem like a reward vs. a punishment and that has helped. I also made the same red, yellow, and green faces at home and have had great success with getting her to listen better!
I'm due in 4 days with baby 2 so we'll see how it goes but I'm happy there has been progress and so thankful that her daycare has been so amazing and patient - they've taught me a lot too!