"But if she did not convert, why is she in full Muslim female costume with her hair entirely covered in the release pictures?"
Because that's how they released her, and because she was videotaped in Iraqi hands. The next time you see her on television, she will be outside of Iraq and will be dressed in Western clothing.
While working in Iraq, she wore the clothing of an Iraqi woman so she could move about freely. I'd do the same if I were a woman trying to be a journalist in Iraq.
Again, wait...
Many women in Iraq do not wear the full Islamic get up, including Iraqi women. Some Western female reporters seem to cover their hair (you know how Muslim men get about hair!), but they don't go the whole 9 yards, literally, considering the fabric involved.
Jill Carroll was doing this before she was kidnapped and she had also changed her name. She was actually not "working" as a reporter, but IIRC had come to work with a volunteer organization of some kind and was filing stories with the Monitor because she had been a journalist somewhere for a couple of years before she got laid off, back in the States.
Supposedly, her translator was a Christian Iraqi, btw. I don't know if this is true, but it would certainly explain why he was expendable. Both the left and Islam know you can't make an omelet without breaking eggs.