There might be a slight miscommunication here Weirdo.
I saw Lilly as one amongst first of the 'mundane transformations' to have a hand at working out magic, and getting actual results. It demonstrates that potential exists for a person to be, whatever they wish to be.
From the military perspective, Lilly and those like her were to be protected at all costs, even as much if not more so then the real magic girls. Never threatened.
They would be spied on, yes, and likely have any notes/theories copied from them to be used and studied- precicely because she was not a 'real' magic-girl, and thus did not have the protection that came with being one. She was an easy target with high gains.
When the teenager was old enough, they would likely have a plan to approach her and see if she would be willing to join in their work.
But only, if she was willing. She was never under any threat by them. But they needed her expertise, as magic does not come naturally and easily to those born of the 'old world'.
As for why she was spied on? In my thoughts, other countries are likely doing the same with their own populations, and some are very possibly not being nice about it (though we could be pleasently surprised.) In this instance, I tried to portray that they had no real choice in the matter. From Makepeace's group, there was a very careful balance between civil liberty, the right to privacy, and the greater need to protect the 'status quo'. It's not an easy choice to make, and they tried to intefere as little as possibly with the teens personal life... but did take all her research.
Maybe it was too far? I don't know. I just felt it's what would happen as a minimum, and it wouldn't affect the main characters too much. Maybe their fear wasn't even real? I don't know, its yet to be established.
