How do I adjust my child's bike shown in this video to improve fit and comfort? Timeline

Provided because I learnt a lot in the process


My 5yo daughter has started growing out of her Apollo Petal with 14" wheels and an upright position typical of a child bike.
Basic research and measurements lead to the conclusion she might be ok with a bike with either 16" or 18" wheels.
I found a good deal on a used mountain bike with 18" wheels so we tried that first but it was clearly too large for her.
I bought her a Decathlon B'TWIN 500 SPY HERO (although the sticker on hers says 900?!) on 16" wheels, still with a fairly upright position typical of a child bike.


The problem

I'm struggling to adjust it so that it's comfortable for her! Neither of us have the patience for more trial and error, so I'm hoping someone with a bit more experience can tell straight away what the issue is.


A similar bike has a good product video  where the actress
seems to have the bike adjusted exactly right (link is to product
website where video is included among photos, I don't think it's
possible to link to video directly and I couldn't find it on youtube
or similar)
This is what my daughter looks like on her bike at the moment. Is she just still a little short for it, or is there something I can do to improve her fit?


Things to note:


The seat only has height adjustment (I can't tilt it or move it forwards/backwards)
I am reluctant to put the seat higher up. At the current height, her
heels are slightly off the ground when sat.
The stem and handlebars are integrated so also only have height
adjustment too. They are nearly at the highest setting. We tried having them lower and it was even more awkward, she was constantly standing up on the pedals.
Seat is too low. Problem with kids bikes as they have disproportinaly long cranks (Shes probably half your height, her legs are half the length of yours, yet he cranks are probably 145 vs your 175..... ). It works because kids are disproprtionaly flexible. I would probably try to raise the seat - just 5mm to start with... Thats much easier for me to say than you to do.   

From experiance with my boys, you need to get to the point she will ride the bike. Don't worry about fit, its not important for it to be 'correct'. If shes over trying different settings, don't force it on her. Ask her what she wants, put it there and get her riding.  If shes over trying new fit, and uncomfortable, give it a few weeks with no pressure.  Make sure the rides are short, if she is uncomfortable and you head out on long rides, it will put her off. 

As time goes on, you can suggest imporvements to try. if she does not like it (If shes like my boys, she won;t out of spite), put it back... 

The goal here is simple - just keep her riding...