First of all, my greatest admiration to your daughter for having the courage to place her precious baby for adoption. My husband and I longed for the opportunity to adopt, but it never happened.
Secondly, having worked with a number of birth parents who gave their babies up for adoption, I agree with Fergus that it may be better in the long run if your daughter sees and holds her infant. Has she been offered pre-natal adoption counseling? Many agencies (both private and state) offer this to birth parents, and I find it to be very helpful. She will experience grief over placing her baby for adoption, and may find that counseling will help her anticipate these feelings, develop an understanding of them, as well as plan for how to deal with them. The same holds true for other family members, as the birth father, grandparents, aunts and uncles are all experiencing a loss.
I was once assigned to care for and DC a birth mother who was placing her infant for adoption. When I went in to do her DC paperwork, I was asked to cover the portion of the infant identification sheet that listed the baby's sex, as the birth mother had elected not to see or hold the baby. I couldn't see how she could legally authorize the DC of and relinquish parental rights of an infant whom she could not personally identify, as she had never seen the baby, and didn't know its sex. I refused to do so, and notified my supervisor. I was not trying to impose my beliefs on the birth mother, but had legitimate concerns over the validity of her consent. I don't know how administration handled the issue.
The only case I was ever personally involved in where a birth couple changed their minds was that of young college students who hid their pregnancy from their families, delivered the baby without the knowledge of any family members or friends, refused all counseling, then left the hospital without seeing their infant. Literally hours before the baby was to be discharged to the adoptive parents, the birth parents returned for the baby. To avoid a long, drawn out legal battle, the adoptive parents bowed out of the picture, but not without broken hearts. If only the birth parents had accepted counseling, perhaps everyone would have been spared the heartache. Fortunately, your daughter is not alone. God bless you for seeing her thru this experience, amid your own emotions.
Getting back to your original question, I don't believe that conscious sedation would be appropriate for delivery. Narcotics are typically avoided within 2-4 hours of delivery because of their potential effect on the newborn's respirations. Also, I doubt that your daughter would be able to effectively participate with positioning, pushing, etc. while under conscious sedation. Effective pain relief can and should be provided, but an epidural would probably be a better choice. I encourage her to discuss all these issues with her OB or midwife, and ask for his/her input on what can be done to make her delivery as positive an experience as possible.
Again, she is truly heroic. She will be in my thoughts and prayers.