Even though she is just a little one, have you asked her why she is hitting? It's worth a try because her answer might give you some insight and help you to help her to stop this behavior.
Since the time-outs are not working, I think you and your dh should sit her down during a time when she is not in trouble and talk to her. Tell her you love her and you love each other and people who love each other do not hit each other. Ask her if she thinks that is true? Again, the response you get might help you. Befor you have this conversation, you and dh need to figure out what it is she loves right now. Is it a doll? A game, A movie in the car? Whatever her favorite is, decide that every time there is a report of hitting, she will lose that privilege for a day. Finding the right consequence is sometimes a little tricky but you can do it and once you find the right one, she will respond to it because as you mentioned, she is a well behaved child.
Don't forget to do this as a couple. This is a good time for her to see that you and your dh are a team. Hope this helps, S.