M.K.
Instead of watering down whole milk, could you try offering 2% milk? As far as the formula, I would stop offering that, as she is now getting her nutrients from her food. (And you'll save a ton of money!!) Also -- do you allow her to have fruit juice? Often, children who are given juices stop drinking water and milk. In general, there is no need to feed a child fruit juice -- give fresh fruit as part of her daily food offerings. If milk and water are her only drink choices, you will see her drink them. Maybe you should stop trying milk for a week after you stop formula, and then re-introduce. If you feel there are allergy issues, please talk to your Pediatrician.
Good luck!
EDIT: For pete's sake...cows have FOUR stomachs -- not 7 or 8!!! And this has absolutely nothing to do with how "clean" they are. In fact, a cow is considered a significantly "cleaner" animal than many (including a chicken or pig), as cows naturally eat grass and will NOT eat on other animals (like a chicken or pig will.) Hence, they are NOT susceptible to diseases that other cannibalistic animals are. Further, if you observe cows in a natural setting, you will see that they strive to stay clean and will not roll in or eat their excrement (like your pet dog will!)