Belly Button

Not sure what's going on with Sasha's belly button but I'm becoming concerned.
She used to have a plain old normal belly button. A regular, ordinary innie.
Over the past few months, it grew and turned inside out. It started popping out. Her abdomen is distended.
At her 2 year appointment just 2-3 weeks ago, I asked her pediatrician about it, and she said she saw nothing wrong. I told her pediatrician directly that I was concerned about an umbilical hernia. The pediatrician said Sasha didn't have any hernia and even if there was a hernia, that umbilical hernias often go away by themselves anyways so don't worry. She mostly brushed me off.

Today during bath, I washed her belly, and the lump in her belly button is getting bigger. Now it's got something hard inside. There's either something intestinal pushing out from her abdomen through her belly button or something growing in there.
I was really grossed out by whatever it was and nearly vomited.
I don't know what's going on. The ped seemed to indicate not to worry but I am worried anyways.

I took a pic of her belly button but it's on my camera. I'll see if I can attach a pic later.

EDIT: See UPDATE