You need to ride this horse back to front. This means a loose rein and pushed forward with your legs (sit up straight) asking her to reach under herself with her hind feet. Start at the walk.
In this photo, she is actually worse than in the one I outlined. She has almost no muscles along the center of her neck and her crest.. but along the jugular groove the muscle is huge.
You don't get the headset THEN ask for the work from the hind end.. You ask for the work from the hind end and as the horse develops, she will naturally start to work correctly. This is called riding the horse back to front.
Right now she is being ridden front to back (worrying about her head position and not the drive from her engine).
She is traveling (most likely) with her body in the shape of a "U." What you are going to strive for is to turn that "U" over so it is upside down.
Here is something for you to look at: What does 'on the bit' really mean?
This is explains it even further: http://www.equinestudies.org/ring_re...s_2008_pdf.pdf
This is a pretty nice horse. She is worth all this work and retraining. It will take MONTHS.