thanks for all of your concern and responses. I take all of it with a grain of salt because I am an animal lover myself and this is actually our third dog. We have a 13 year old boxer/lab mix and a 12 year old beagle who dominate the house and are very spoiled babies who are very content and well cared for and loved. As is our newest addition.
The dangling her over the banister was an isolated incident and she is normally very sweet with her and carries her around like a baby. But I thnk initially she thought of her as a stuffed animal as she looks just like one! But I am teaching her that she is a living breathing creature. and trust me I was extremely upset with the *incident* and once she realized how upset I was and what she did she was very remorseful and knew she was wrong. I think she may even be a bit jealous of the attention the puppy gets from me and the rest of the family. So I am going to focus on paying more attention to her to hopefully relieve some of this jealousy/resentment.
I have told her she is not to touch or hold the puppy unless I am right next to her and she has been good about this. Shamrock is a very sweet dog but by no means innocent either. She bites and jumps on our older dogs all day long and even attacked the Beagle for trying to eat her food

They have taken quite a bit of abuse from her as well. They are scared of a 6 pound puppy and I have to admit I have been as well when I have tried to play with her and she is being too aggressive and biting my hand or leg and doesn't stop when you say no! And I am nothing but gentle with her so I know she needs discipline as well.
And I understand she is a puppy and biting is a part of playing so we end the game as soon as she starts to bite to teach her this is not acceptable either. I understand why Shamrock may have felt the need to scratch her face to get away but we have two other dogs who have we have never had any issue with. I understand this is partly due to her small size and I do look at it as an opportunity to teach my daughter respect for all creatures and the responsibility and satisfaction of taking care of a pet. They did not bond as well as I would have liked.
My son on the other hand who is 7 is very gentle and sweet by nature and thinks she is the cutest puppy in the world. She sleeps with him every night and he is a big strong kid but he holds this puppy like she is a baby and is so sweet with her it is really touching. I would hate to take her away from him as he is really attached to her and loves taking care of and playing with her.
As does my daughter now that she realizes she could really hurt her if she is not gentle with her. I tell her to treat her as if she were a baby because that's what she is. And she won't pick Shamrock up without me being in the room now and says *see mommy I'm being gentle* so I think she is starting to understand what is expected of her. I also stress if she wants to get down and pulls away she needs to let her go. I think sometimes she wants to be affectionate and does not realize it is not wanted or she is holding her too tight. So as I said they are being supervised 100% of the time now so I don't think we will have any more issues.
thanks again for the advice and take care!