I'm inclined to agree with your daughter. The poem doesn't seem to be realistic in the way some ballads are; for one thing, you couldn't make actual clothes out of a harp. It seems more as if the "clothes" are a metaphor for the magical, protective power of love, and perhaps also for the magic of creativity - the kingly clothes are a kind of expression of art, like music made visible.
But like all good poems, it can be read more than one way - your daughter's class will probably have more discussions about it.
But like all good poems, it can be read more than one way - your daughter's class will probably have more discussions about it.