Dear NFA -
My guess would be that while she's saying she wants to be friends what she really wants is to have you as a back-up. That way if she doesn't find a "better guy" locally she still has the option to move up with you. Otherwise she risks both losing you and also being alone, i.e. the worst of all worlds.
But for her to go up to you would involve a wrenching change and a lot of work. So she probably thinks that's not her best option. The best option in her mind is probably if she could stay where she is and have a good guy right there. Once someone "settles" in a place it can be hard to think about moving, especially when a child is involved.
If it does seem like she's settling into her new spot, and resistant to move, then it might be best to strive to move on. It would take a lot of energy to overcome that inertia, and it sounds like she just doesn't have that in her right now.