Another vote for the GameCube. There are lots more quality titles for younger players available for the Cube than the PS2, in my opinion, although I can’t speak for the X-box. But, then, the X-box is clunky looking. If I was seven again, I’d be way happier with a purple/silver/black Cube.
In addition to the games previously mentioned, check out Spirits and Spells, which is about two trick or treaters (a “witch” and a “devil” who get lost in a haunted house, and looks really cute;Finding Nemo, which is a good game for a movie license; and Spyro: Enter the Dragonfly, which is about a purple baby dragon.
Those games are all out now, and are listed at $19, $29, and $19
respectively, so you can take the extra dough you have from choosing the GameCube and give her a good starting library of games, without breaking the bank.
Also, Legend of Zelda: The Wind Waker is a game you must have if you own a GameCube. It’s adorable, and a blast to play. (And it gives you an excuse to buy a GameBoy Advance, so you can plug in and help her with the hard parts!)(um, the GBA isn’t required to play the game though, it’s just a fun addition.)