I recommend:
The Ordinary Princess by MM Kaye
Ella Enchanted by Gail Carson Levine
Sarah, Plain and Tall by Patricia MacLachlan (1st in a 3-book series; haven't read the others)
Song of the Trees by Mildred D Taylor (companion to the series that includes Roll of Thunder, Hear My Cry, but the subject matter might be a bit heavy for a 7-year-old)
Rapunzel's Revenge by Shannon & Dean Hale (art by Nathan Hale - no relation)
Calamity Jack by Shannon & Dean Hale (art by Nathan Hale; sequel to RR, above)
She might also be OK with classics like The Secret Garden and A Little Princess by Frances Hodgson Burnett; The Wonderful Wizard of Oz by L Frank Baum; or even Rebecca of Sunnybrook Farm by Kate Douglas Wiggin.
The Ramona series should be in her sweet spot, as well as A Series of Unfortunate Events (depending on her tolerance for mild peril and spooky situations, of course.) She might be a little young for Tales of a Fourth Grade Nothing, but it's short and nothing truly tragic happens in it so give it a whirl?
DD loves the Who Is...?/Who Was...? books.
I'm also reading out loud to/with DD. Since kindergarten, we have read:
Fortunately, the Milk ... by Neil Gaiman
The Wonderful Wizard of Oz by L Frank Baum
A Wrinkle in Time by Madeleine L'Engle
The Hobbit by JRR Tolkien
The Ordinary Princess by MM Kaye
Harry Potter and the Sorcerer's Stone by JK Rowling
Harry Potter and the Chamber of Secrets
Harry Potter and the Prisoner of Azkaban
We are currently reading The Lightning Thief (book #1 in the Percy Jackson and the Olympians series) by Rick Riordan.
It's given me an excuse to let her learn more about Greek mythology using our copies of A Child's Guide to Greek Mythology and D'Aulieres' Greek Myths.
I'm looking into the kids' editions of The Iliad and The Odyssey for more complementary reading if she continues to like Percy. (I recently read the Emily Wilson translation of The Odyssey and it was very enjoyable. It's weird; I've had a familiarity with the story for so long, but had never actually READ it, so this was a good translation to choose. Just to be clear: Professor Wilson's translation is not for kids.)
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Liz
DD (3/2010)
"Make mistakes! Get messy!" - Miss Frizzle