L.B.
You may want to start out with the "our generation" Dolls from Target that is very similiar in size as the American Girl dolls. (you can also check the reviews of parents that were in the same situation as you - (child too young and AG dolls expensive). They are not as expensive but still very very nice. If she does good with that she could advance to the next level. Also the clothes are interchangable between the two dolls.
We gave this to my 8 year old and she absolutely loved it. Besides I could afford to get the awesome assesories too so she had more than just a doll to play with.