529 and financial aid

I have set up a 529 converted from a UGMA for my daughter who will be attending college next fall. As I understand the rules, UGMA's are weighted much heavier than 529's in determining financial need. Can I convert the UGMA-529 to a regular 529 once she turns 18, and is there any penalty?
She also has quite a bit (around $8000) that she has in a savings account. She insists she is better off to take it out of savings and not redeposit it in something else because it will "cost" her in aide. Any advise?
If we do put it in a college account, should we add to the UGMA-529 or open a new 529.

Public school or private?

Generally, it is better if the parents own the assets. I think its like 5% of parents assets vs 35% students assets are used when calculating financial aid eligibility, but it is different depending on the type of school your child is going to.