Has she been cheated on previously? If so, its hard to get over insecurity and that feeling that if it happened once it will happen again. I think you just need to tell her exactly what you said, "She's the only thing/person that i'm involved with, love and will do anything for." Sounds like she needs to hear it. As for the arm around the other girl, she likely will never forget it but she will have to learn to trust you and that it really did mean nothing.
So, so you think you can tell Heaven from Hell,
blue skies from pain.
Can you tell a green field from a cold steel rail?
A smile from a veil?
Do you think you can tell?
And did they get you to trade your heroes for ghosts?
Hot ashes for trees?
Hot air for a cool breeze?
Cold comfort for change?
And did you exchange a walk on part in the war for a lead role in a cage?