The only lesson she is going to learn from you continuing her punishment is that you don't mean what you say, that you are punitive, and that there is no point in getting her grades up because you will just dig your heels in on her. And then she will dig hers in and "pay you back".
A teacher did that to my husband when he was in 7th grade. He worked hard to get his D up to a B. He was so proud of his grades. Boom - his report card came with a C on it, and when he went to her with his averages, she told him that anyone in her class who made a D on a test early on didn't deserve a B, no matter what the end grade was. She affected him for YEARS over that.
So you should think hard before you show your daughter that kind of attitude. Personally, I think that you should never have told her told her she could have her privileges back as soon as she got her grades up, if you didn't mean it, no matter what you think that she has to learn. Learning that mom doesn't keep her word, or if she really holds you to your word, deciding that you are a liar, is a bad lesson.
Dawn