I would also terminate. It is our job, first and foremost, to keep kids safe. And, well, like you, I could not guarantee that level of safety when it comes to food allergies - ANY food allergies that could potentially be fatal.
I feel for the parents of kids like this but honestly, I can't take on that risk. I would also terminate them and I would honestly tell them why. I would word my letter to be very specific in that I do not feel competent enough with regard to food allergies to keep her safe.