"I (have) proposed to her" refers to a proposal of marriage. Is that what you mean? #2 should be "she rejected it", but neither of your options is very good because "it" doesn't refer to anything very specific in the context. You could say:
"... but she refused."
"... but she refused me."
"... but she rejected me."
In some contexts, "to reject something" can mean very much the same as "to refuse something". For example:
"She refused the gift." ~ "She rejected the gift."
"She refused the offer of help." ~ "She rejected the offer of help."
In other contexts, "to reject something" implies that something is taken into one's possession, or is under one's consideration, but is then a decision is subsequently taken to return or discard it. In these cases, "reject" is often preferred to "refuse". For example:
"The company has rejected our latest batch of components."
"He rejected my idea."
"I applied for the job but was rejected."
Some other differences that come to mind:
"refuse" can be used with an infinitive (e.g. "She refused to go."), but "reject" can't.
"refuse" can be used intransitively ("She refused.") but "reject" can't.
You can be "refused something" (e.g. "She was refused entry.") but not "rejected something".