L.T.
Strong willed children can be a blessing. I've posted this suggestion (that's worked for me) before. Keep using the time out but move it to the door or a wall. To do this, have her put her nose on the wall or door for 1 minute for each year that the child is old, with their hands behind their backs. If they move away from the wall/door, the time stops and won't stop again until they are back there. You'll have to be in the same area as they are to make sure they stay where you've put them. After their time is up, have them go to the person to say that they're sorry for what the did and have them repeat what they did. Giving the other person or child an apology has got to be one of the hardest things that any child can do. The reasoning for using a wall or a door is that they can hear what's going on around them but the can't see or participate in what's going on. Since there are walls and doors everywhere this can be done anytime, any place. Even if you're outside, a tree will also work nicely.
Now for the verbal part of this. Ask her to please tell you why she did what she did. In her mind she may not even know but since you're mom you can help explain what she did and why she being punished. You'll need to be on her level, in other words, you'll need to be eye to eye with her. Have her look you in the eyes when she's talking to you. Teach her about how other people feel when someone treats them poorly and how she would feel if someone treated her this way. Keep it simple, short, sweet and to the point.
Both you and your husband will have to be united when you're handing out this kind of punishment. You both have to also treat the other two children in the same manner. Don't let them see that your angry, but show them how disappointed you are at their behavior. Teach all of them about their own feelings and the feelings of others. Teach them that when they are in this kind of time out, that they can't be talked to or make fun of because that person will also get the same kind of timeout. My teenage boys will tell you that this isn't any fun when it happens. Teach them the true meaning of saying "I'm sorry" and mean what they say. Teach them how to love their brother and sister. Have each of them make a picture book of these emotions, and do a section of this book a section at a time and teach them about each emotion. Do this as a group because you'll teach them how to share with each other. Make the book out of construction paper and pictures from magazines and pictures that you can print off the internet. Punch holes in the side of the pages and put them in a binder or even in an old picture album. Sit down with each child after the book is done, and have them tell you about each picture. There again, keep it simple and within your budget.