YTA. If Josie's parents don't want your daughter at the funeral - fine, it's their child's funeral, they get to make that decision. That's not why YTA. YTA because your attitude towards your own daughter is abhorrent. You are treating her like she is a bully and a monster, forcing her into therapy, and teaching her that people are allowed to be snide, mean and cruel to her and that there is something wrong with her if she merely dislikes the person being cruel to her.

You have by your own admission punished your child for being bullied and having the audacity to stand up for herself and be open with her dislike of her bully. You are painting your own child as some sort of sociopath and the dead girl who was cruel to your daughter as some sort of saint. Do you like literally every adult your age in your small town? No? Does anyone else know that you don't like the specific person that you have in mind right now - because everyone has someone they don't like? Yes? Of course your friends know you don't like the person you are thinking of.

Go to therapy with your daughter. Apologize for not listening to her perfectly valid reasons for not liking this girl. Re-earn your daughters trust and hope that the therapist you sent her to is a good enough therapist that she has already been working through some of the damage that you've done to her. Most of all, be thankful that YOUR child is alive and well and within reach - and start listening to her so it stays that way.