Passport and Customs

I would say most folks here are rules followers and risk adverse, so wouldn't want that stress. There have been several reports here of folks who noticed right before a trip about their expiration date, and rushed around to get their passports renewed, and other folks canceled/ postponed their trips.
I would not expect many reports of countries waiving the three- month rule .
Future safe travels!

. Iceland Air accepted her passport as she got on the flight in Seattle,

Surprising it slipped by. Suspect someone in Seattle is getting an earful from a supervisor.

Is it common for European countries to waive the 3-month rule, or do they strictly adhere to passport date of exit 3 months prior to departure?

No reason to expect there would a waiver of a clear black and white rule.

Trying to cross a border with a non-compliant passport is not like getting pulled over for doing 66 in a 60 zone and expecting to get a 'warning' ticket.

"Is it common for European countries to waive the 3-month rule"

Why would anyone think that any country, let alone European ones, would consider their published entry REQUIREMENTS to be merely suggestions? The rules state that you MUST have 3 months validity after departure. They don't say it would be nice if you had around 3 months.

As for her detention prior to her deportation - that is the usual practice in any country for someone attempting to enter a country without the proper documents. Did you think they would give her free rein to do whatever she felt like?

I thought all Passports have to be good for 6 mo. This rule has been in effect for as long as I can remember. Anytime I book a trip w/a TA, they always remind us of this. It's also on the TSA website. It's also here in the RS Travel Tips and many of his books. It is always taken very seriously.

." Iceland Air accepted her passport as she got on the flight in Seattle" Sounds like Iceland air owes your daughter an apology and some compensation for letting her board in Seattle?

Many European countries, including Iceland, are signers of the Schengen Agreement. As a result, they follow the 3+3 Rule, which says your passport must be valid for three months beyond your three-month entry visa or for a total of six months, regardless of how long your initial stay is. It's pretty clear. They don't waive this requirement.
We have a friend from South Africa who was planning on joining us on an Alaska cruise this summer. She was told by the booking agent that her 10-year US Tourist Visa (her daughter is a US citizen) would cover her for entry to Victoria, Canada. In Seattle at the cruise terminal, Princess turned her away, because this was not the case. South Africans need a visa to enter Canada. Yes, we blame the travel agent for not knowing the correct rule, but ultimately, she admitted that she was responsible for not knowing. It was a $2,000 mistake.

It wasn’t Customs that denied entry it was Immigration.

Your daughter was not deported, she was denied entry. Big difference. If she was deported, she would have a hard time re-entering Iceland or any Schengen country. . It sounds like she was denied entry for improper documents.

Security has nothing to do with this. It was immigration. (Customs is for goods, immigration is for people.)

Because she was denied entry, the airline that flew her over is responsible for getting her home. There should be no charge for this.

It is the responsibility of every traveler to know the rules of entering another country. Countries take their entry rules very seriously.

Icelandair will receive a fine for this. They should have caught it.

She was "treated as a criminal" because she technically broke the law.

Be glad she wasn't someone denied entry into the U.S. Here, you might go to jail and stay there until your flight.

Iceland Air accepted her passport as she got on the flight in Seatle,
so she wasn't aware of the problem until she arrived.

Icelandair made a mistake by allowing her to board her flight, and will be fined for this. But in the end it is her responsibility to make sure she has the correct documents.

At one point, a security person said you Americans think you can get
away with anything.

If your daughter had the same attitude that you've shown in this post, that comment was probably justified.

She was held and treated as if she was a criminal, then escorted to a
plane back to the US.

She was caught trying to enter the country illegally. How did you expect them to treat her?

Too bad this happened, but it seems from your post that either you or your daughter knew in advance that she was pushing the envelope on the rules. When anyone travels to a different country, it is their responsibility to know the rules to enter and how long they are allowed to stay without a visa. I assume that your daughter is old enough to be aware of this, and if not then you should have helped her out.

In answer to your question -- no it is NOT common for European countries to waive the 3-month rule. And if you travel next year you will probably need a visa, so more research for you and/or your daughter.

Security decided to make an example out of her..... and separated her from her group

What 'group' was she with? Just a group of friends or some commercial/organized tour company group?

If the latter, one has to wonder why they did not have the tour members provide a copy of their passport when signing up for the tour to make sure this sort of issue did not arise.