R.D.
Hello, A., you sound like a wonderful mother. We all fear that something awful will happen to our babies. It is normal and healthy. I do agree that video monitors help. I used my home camcorder on a trypod with a TV cable to a TV in my bedroom. That worked as long as my kids were in the crib and couldn't reach to pull it down.
Regarding the use of a pillow: Assuming it is large enough to not be a choking hazard and assuming your daughter has full range of motion, I would think the pillow is okay. After a child is able to roll over and be aware of difficulty breathing, then pillow suffication is less of a risk.
But, if it a serious fear for you, then find another time for her to have the pillow so you can maintain the sense of security. Perhaps she can hold it while you read stories or perhaps her doll/favorite animal can use it in their bed. She may be okay giving it up then.
I trust you will choose a safe and loving solution. Best wishes.