It sounds like your doing the right thing. You just have to keep being consistent, it could be she has stopped crying because she is starting to expect the time out - and wants to see if you're going to NOT give it to her if she changes HER reaction. My daughter is just over 2 years - and we do a sort of abbreviated time-out. I don't time it, but we will put her in a particular spot and tell her she needs to stay there because of XXX (usually not listening or hitting one of us) and then I usually wait awhile (usually around a minute - to allow me to get a grip more then anything); then I go and sit next to her and remind her she was there for XXX reason and we don't do that, she apologizes and we move on with our lives. :)
Something my mother did with me, when I was little, she would sit me in her lap, my face away from her, wrap her arms around me, and if need be lock my legs with hers - and basically bear hug me/restrain me while telling me hitting was not allowed. I was a big hitter/fighter (mostly my younger sister who was more able to use verbalize herself and frustrate me).
Just keep it up, keep calm, keep consistent!! Good Luck!!