But biology says..

Actually...

In a situation WITHOUT the time loop, Jane would have parental and maternal DNA, and would be able to create a wide diversity of gametes because of mechanisms that increase genetic variation such as crossing-over and homologous chromossome random assortment, regardless of the fact that she is an hermaphrodite. Assuming that she has two functional sets of both male and female genitals, in a theoretical scenario where she would self-copulate, she would still be able to create a different organism, because the gametes would still be different. That organism would be, genetically speaking, halfway her child, halfway her sibling, and yes, there would be room for a lot of defects since there's a lot of DNA of a whole different human being (the father) missing. The chances of recessive diseases are extremely higher.

On the other hand, in the situation of the film, WITH the time loop, Jane doesn't have parental nor maternal DNA, because she was generated only by herself. She just has her own DNA. This is obviously impossible to happen in real life and only happened in the film because the time travelling created a "egg vs. chicken" event and nobody knows where the original Jane came from. Biologically speaking, the original Jane could never be equal to "her daughter" because the first would have both parents' DNA, and the second wouldn't. If "her daughter" generated her own child, to give continuity to the story, mother and daughter would be genetically identical, since there would be only one person's DNA involved (and not two person's DNA, mother and father, like in the original Jane), homologous chromossomes would be identical and, despite all mechanisms of genetic variability, the result would be the same, because all that would be trading and crosssing would be just identical copies.

I'm not sure if my thinking was clear, or even correct... xD
But it is definitely an interesting subject :)

That offspring from siblings is very likely to have some defects due to inbreeding, homozygotes and whatnot.

Personally, I believe Jane was a genetic chimera. Go check wikipedia, but essentially, this is where a person has cells with two different types of DNA in their body. In the womb, two fertilised eggs could have developed as twins, but instead they fuse and only a single individual develops. Imagine Siamese twins, but one twin only exists at a microscopic level, never developing a distinct body. Importantly, chimerism can lead to having both genital types (like Jane).

There are about 30 documented human cases, like Karen Keegan or Lydia Fairchild, discovered through DNA testing for legal reasons. In those two cases, their ovaries must have had different DNA to the majority of the rest of their bodies.

Chimerism is simply my personal solution to the OP's question, and the topic is certainly not addressed in the film, nor the original short story. Nor of course does it have any bearing on the existential question which is the theme of the story.