Children explore fantasy through play. It's okay to let her do this IMO. My kids both have done this and both are great kids who know right from wrong in real life. There was a great documentary, Raising Cain, based on the book that talked about little boys not being allowed to play out their war games anymore and how this can be detrimental to them being in touch with their inner emotions. I thought that sounded very interesting.
My 2yo has her dolls fight all the time. My 5yo will have the mothers of her dolls die (she prefers animal toys, so I say dolls meaning My Little Ponies, horse toys, etc) and she will go through the whole burial. Sometimes they fight or yell at each other. I let both of them play like that. Sometimes I will talk to my 5yo about it later, but not in a judgemental way. I just ask her what happened to the mommy pony, how did the baby pony feel? Things like that.
My 2yo has her dolls fight all the time. My 5yo will have the mothers of her dolls die (she prefers animal toys, so I say dolls meaning My Little Ponies, horse toys, etc) and she will go through the whole burial. Sometimes they fight or yell at each other. I let both of them play like that. Sometimes I will talk to my 5yo about it later, but not in a judgemental way. I just ask her what happened to the mommy pony, how did the baby pony feel? Things like that.