If she MUST have a cell phone, I would suggest going to the host company and asking that the photo be tracked and 'recalled' and deleted. There is a chance it can be done, I have heard that it was done with a local girl who did something similar.
Also, on her service plan, you usually can disable the text, email, & internet features. We did on both daughter's cells and we have two different companies - Verizon and Cingular - and it worked fine.
Another option is to take away the cell altogether. OR, change the number and get her a very basic cell phone without a camera or texting/internet abilities.
*Just wanted to add that while it may be helpful if you contacted the school guidance office, I wouldn't expect them to be helpful. In fact, I can very well see this backfiring on you and difficult child. Tread carefully.
Meanwhile, denying is fine if it saves you and your easy child embarrassment. However, I really think that difficult child needs to own up to her irresponsible, disrespectful behaviors and see the wrong in it so she can stop it in the future. Also, I would think about having a word with the nice young lad who suggested difficult child send a picture of her privates to him - what the heck??
Best of luck - your difficult child sounds so much like mine. This is something I wouldn't be surprised about in my difficult child's case. Ugh, I know how you feel, gentle hugs.