Hi, M.!
It is so frustrating and upsetting when your sweet child is hurting other people! I think you're absolutely right: she has been using biting as a means of communicating. And, while it may have been working for her to some extent, it's definitely NOT working for anyone else, and it cannot continue. But what to do about it!?
I don't believe that time-outs work the way we want them to. Kids don't go into time-outs and use that time to think constructively about what they've done. They don't get repentant; they get angry. They plot revenge. They feel misunderstood. I can pretty much guarantee you that they *don't* sit there thinking, "Man, I'd better get my act together! Biting is so wrong!" Really.
A much better idea would be to *prevent* your daughter from getting to biting stage in the first place. This requires your constant supervision when she's with other kids. I know that this can seem daunting, but remember: kids that young don't know how to play with other kids. They're not really social beings yet, and they need us to pay careful attention and watch for signs of mounting aggression. When we see those signs, we can anticipate something going wrong before it even gets that far. We can intervene to help our wee ones get what they need without them having to resort to violence and aggression.
Remember that this stage passes relatively quickly when viewed in the big picture. Young children need us all the time. As they get older, they still need us, but not in such immediate, intense ways.
I know that sounds like a great deal of involvement on your part, and it is! But, your daughter will benefit so greatly from your involvement and your gentle, loving interventions. You'll model for her a more acceptable way to get what she needs, and she'll benefit far more from that then she ever will from committing a "crime" and then getting punished. I don't believe the lessons people learn from being punished are the ones the punishers ever intended. (For more about that, I recommend Alfie Kohn's book, "Punished by Rewards," and his newest DVD, "Unconditional Parenting." You can find them at www.alfiekohn.org.)
I hope this has been helpful! Best of luck to you and your daughter!
~Marji (please feel free to contact me, if you would like clarification about any of this or want to discuss this further)