My understanding is that the VA does an independent review to determine if the member's service qualifies for VA benefits.
The dicotmy is that the member apparently went through a PEB. Something is funky if the condition that went through the PEB resulted in an UOTHC discharge. The UOTHC could be from something different. The OP will have to clarify.
Given The VA apparently service connected the conditioN, coupled with the historical inability of PEBs and review boards to properly adjudicate these types of cases, I suspect that PEB error may be an issue in this case as well. Again, the OP needs to provide deeper details.
An option for her is to appeal to the PEB if she has not separated yet. I would be asking the PEB for the clear and unmistakable evidence they used to overcome the presumption of service connection and service aggravation as PEBs continue to be ignorant of this requirement. Post separation she can also appeal the EPTS determination to the Disability Review Board under 10 USC 1554.
Mike
Applying for Benefits and Your Character of Discharge
Generally, in order to receive VA benefits and services, the Veteran’s character of discharge or service must be under other than dishonorable conditions (e.g., honorable, under honorable conditions, general). However, individuals receiving undesirable, bad conduct, and other types of dishonorable discharges may qualify for VA benefits depending on a determination made by VA.
Read the factsheet on claims for benefits involving other-than-honorable discharges.
Correcting Military Records
Each of the military services maintain a discharge review board with authority to change,
correct or modify discharges or dismissals not issued by a sentence of a general court-martial.
Read more about correcting or changing your service discharge.
Specific Benefit Program Character of Discharge Requirements
Discharge Requirements for Compensation BenefitsTo receive VA compensation benefits and services, the Veteran’s character of discharge or service must be under other than dishonorable conditions (e.g., honorable, under honorable conditions, general).
Discharge Requirements for Pension BenefitsTo receive VA pension benefits and services, the Veteran’s character of discharge or service must be under other than dishonorable conditions (e.g., honorable, under honorable conditions, general).
Discharge Requirements for Education Benefits
To receive VA education benefits and services, the Veteran’s character of discharge or service must be honorable.
Discharge Requirements for Home Loan Benefits
To receive VA home loan benefits and services, the Veteran’s character of discharge or service must be under other than dishonorable conditions (e.g., honorable, under honorable conditions, general).
Discharge Requirements for Insurance Benefits
Generally, there is no character of discharge bar to benefits to Veterans’ Group Life Insurance. However, for Service Disabled Veterans Insurance and Veterans’ Mortgage Life Insurance benefits, the Veteran’s character of discharge must be other than dishonorable.
http://www.benefits.va.gov/benefits/character_of_discharge.asp
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