M.L.
I'm a hairstylist so some tips could be useful. The twisting causing breaking doesn't sound right, but I suppose it could happen. Does she wear elastics in her hair, or gets her hair brushed or pulled back when it's wet? That is usually the cause for mechanical breakage not relating to heat/chemical cutting (such as curling or flat irons that cause breakage).
Cutting her hair won't make it thicker... that's an old wives tale with no scientific basis. Her hair will thicken on it's own as she ages. That's why people think it works. The hair that would be growing in comes out while the hair is growing back out.
Hot oil treatments are good for porous and damaged hair. Leave in conditioners are good, but can weigh her hair down over time if it's really that fine. I don't know her overall hair condition, so that is a determining factor as to what types of products to use.
You can try braids or pulling her hair back, but to stop the twisting you need to redirect her behavior, by reinforcing another type of habit. Kids have ticks like this, pull on their earlobes, pinch their elbows, twirl their hair, twist their shirts...
Dr. Sears has some good advice on helping to break common habits:
http://www.askdrsears.com/html/6/T064000.asp