I have had this for as long as I remember. Keratosis pilaris (sp?) is really another name for dry, sensitive skin. In the past I have used prescription lotions (lac hydrin lotions with varying strengths). There's an OTC lac hydrin as well. It bothered me more as a teen and child, so I was religious about applying these. As an adult, I've not been so concerned about it. I use lots of different lotions and creams, but haven't found a miracle cure. I have found that exfoliating helps, but I don't think your daughter is old enough, maybe she is. I have also noticed that being in the sun a little bit helps. I have an olive skin tone, so I don't burn easily.
As far as self esteem goes, this condition is really not that extreme (at least in my case), and you and your husband can just help enrich her life by not focusing on skin redness or bumps. I come from a family of 5 kids. I am the only one with keratosis pilaris, and I am probably the most confident of all of us. I dated in high school, married a wonderful man, went to college, have had a successful career, etc. etc. It is great that you are thinking about this now, but I hope you won't become too worried about it.
That being said, I would be interested in hearing if others have found that miracle cure. It can never hurt.