She is fulljumping, but the force pulls her downward which has the result of shortening her jump.
The reason Nana jumps continuously is because there's a 4 frame window for buffering tap jump (but not jump with X/Y). If you hold up on the control stick for the duration of the jump, and then land, Popo will not jump because the input was buffered for far longer than 4 frames. However, Nana enters CPU mode on impact, then quickly reunites with Popo; this effectively "wipes" her input queue, so that anything previously buffered is now considered fresh. In other words, she looks back 6 frames, sees that you're pressing jump, and acts from there; landing lag terminates less than 4 frames later, so the buffered jump takes effect.
This is the same mechanic that allows you to buffer desynchs from roll, spotdodge and so on (although this application is much less widely known). I will have a more detailed (and hopefully clearer) description in an upcoming thread on ICs' advanced mechanics.
