You're right to check the terms of her contract before getting litigious. If they make no claim of ownership to your daughter's stage name, or better yet, identify her party as both her birth name and stage name at the beginning of the contract (demonstrating they did not create the pseudonym), I'd say you're pretty much in the clear. They may dispute that any creation she comes up with during her contract is their property and they would be somewhat right. But the name itself, doubtful. As far as them using TM on adverts, just remember that TM has no legal weight and is only a claim to the public saying "back off! we're using it". Only the "circled R' has legal weight. They may be using the TM symbol in an attempt to setup a common law argument should they encounter a dispute while trying to register it. But it's a pretty moot point if you can prove your daughter's use of the stage name prior to any of their uses in the same class (e.g. entertainment).
Your daughter could try registering her stage name with the USPTO herself, incurring only the Trademark Processing Fee of $375 (with some other potential costs adding to the bill - see: http://www.uspto.gov/web/offices/ac/qs/ope/fee2008october02.htm#tm
) or you could hire a lawyer to setup it all up (that can cost anywhere north of $500, shopping around required). The use of a lawyer is recommended though as intellectual property laws are very complex. If you do this, there is no need to tell XYZ company about it until the registration is complete. If the contract is renegotiated, then she can actually use her intellectual rights to bargain (or not) the use of her stage name as she would own it according to the Federal Registry. If she's a singer, actress or entertainer of some sort there may be a union with which she can register herself under her stage name. This gives you even more of a legal argument. If "merchandizing" her name isn't something you want to do, then you may even forget the trademark altogether and stick with the union's registry... but who wants to foresake merchandizing rights, right?!