Any horse can do dressage. From what I"m seeing in the picture, she is behind the vertical, and on the forehand. She is not using her back at all. If this is better than before as you said, then my guess would be that before, she was hollowing...and this is how her back normally would look like without hollowing.
She needs to learn to step under herself more, and that will help with getting her off her forehand.