Hi! Adult AG collector here.

I currently have 13 dolls and I have been part of the collectors community since 2009. Ask me anything!
You need to talk to your daughter! This is a BIG decision. Sit down with her and look through the catalog or website. You might also go to the library and check out some of the books for you to read together. Not every girl wants a doll that is her mini me. I never did. I love the stories that go with the character dolls. I also recommend you check out
http://www.agplaythings.com/ for more info.
That is NOT always true! There are some dolls that are highly sought after like Kanani, Nicki, Lindsay and Nellie. But the average Truly Me doll, unpopular Girl of the Year dolls or historicals that have been produced for decades can be bought for FAR less than retail. However, finding those dolls can take some time and effort. If you are wanting the doll for Christmas it's best to buy one new at this point in the year.
I'm sorry. It really irks collectors when people say that. It gives people who are new to the brand false impressions. You can't choose your own face mold, skin tone, hair color, eye color combo. You can choose from a large selection of dolls in various combinations. Currently there are 40 Truly Me dolls available. But 64 different combos have been produced since 1995.
http://americangirl.wikia.com/wiki/Visual_Chart_of_My_American_Girl_Dolls
For a five year old just starting out... I'll agree. (Older kids... not so much.) Target's OG line has really stepped up their game in the past year or two. Before their stuff was really junkie. But do be careful with some of their stuff. Clothes that are black, red, dark pink, etc can bleed onto your doll. If that happens with an AG outfit on an AG doll, AG will repair the doll for free. If that happens with off brand or home made clothes on an AG doll, you have to foot the hospital bill yourself.
sailorstitch