Do I have to file both Form I-485 and I-130 together and does her passport have to be current?

There is no legal requirement to concurrently file the I-130 and I-485 applications - sometimes people have reasons to file the I-130 and await its approval before filing the I-485 Application for Adjustment of Status (to get a "Green Card"), but without a sufficient reason (such as applying in a visa category for which an immigrant visa is not "immediately available"), the two applications should be filed together. Our firm advises clients to have a valid, current passport for use in the application process, since the USCIS generally asks for this to confirm travel and re-entry dates through the date of application approval, but sometimes there are practical reasons for not doing so (such as where one must travel overseas to obtain a renewal). It would be wise for you and your daughter to consult with an immigration attorney, who, after learning all of the relevant information about your family, could advise about eligibilities, options and strategies for your daughter, and could offer legal representation for the application process - which often is significantly more complex than it might appear.