Another thought - when you dry her, make sure she's really dry. My dd had that behind her ears and was much better when i washed and dried her there thoroughly.
Also, talk to your ped about it. I'm not sure, but it could be a health or nutrition related.
One of the baby powder issues is the baby inhaling it into their lungs, not just what's in the powder.
I found this on http://www.netwellness.org/question.cfm/49953.htm
Question:
8 month old baby has underarm odor. What could be the cause? She has a bath every other day.
Answer:
It is very unusual for a baby to have underarm odor. This normally occurs slightly before the onset of puberty when the sebaceous or oil glands become active. They produce typical body oils that bacteria on the skin process producing typical body odor.
As a first step, I recommend trying a daily bath. If that does not work, then it is time to consider the presence of a problem with body's ability to breakdown proteins into their individual amino acids, the building blocks of proteins, or use them in growth. The unusual odor results from a high level of the amino acid in the body and can affect the odor of urine, breath, and body. Most children with inborn errors of metabolism also have other symptoms such as poor growth, slow development, or digestive problems. Identifying the problem early leads to better health and development for the child.
Newborn screening tests for inborn or inherited disorders of metabolism vary widely among states. If daily bathing does not eliminate the unpleasant odor, then take your child to her doctor unbathed so that the odor you are concerned about is clearly present. Ask the doctor to review your daughter's newborn metabolic screening tests and to consider ordering those not obtained at birth. If the doctor is unwilling to pursue the problem, you may want to ask for a referral to a pediatric metabolic specialist.