Wow! Lots of varying responses here, but I say if it isn't a power struggle (like if she isn't this way about other things, like food, etc...), give her limited choices - the things you know she likes to wear, plus some similar items.
Of my 3 kids, only my middle one (a boy) went through this at a young age. He ONLY wanted to wear blue jeans - not any other color denim, not shorts, just JEANS! He was 3-4 years old then. It was expensive to buy him decent jeans that he wouldn't tear up - and he didn't like elastic-waisted cheap ones! So as long as they weren't terribly dirty, he kept wearing what he wanted without me having to wash them every single day. He only went to preschool 3 days a week, so some days, he just ran around in underwear if we weren't going anywhere! He eventually outgrew it, but has still been particular about the style of his clothes! He is only 10, but you'd think he was a girl! My dtr and oldest son would wear stuff out of a trash heap if I'd let them! They care not! I know all that will change once they realize that WalMart and Kmart actually don't fly in the fashion world, but as long as they are wearing out all their clothes, or growing inches after wearing their good Levis three times, I will buy cheap as long as possible!
There certainly are more important things to battle over, and as a child who always felt I would hurt my mother's feelings if I told her I didn't like something she wanted to buy me, and then I'd get made fun of or take a change of clothes to school - it is a struggle not worth it! As a mom, I try to understand that if my child isn't comfortable, for whatever reason, in their clothes, they won't have the self-confidence to be themeselves and their relationships with friends could be affected. It sure was that way with shy old me, until I started letting my mom know I wanted to be the one picking out my clothes. I never wanted trashy, slinky stuff as a teenager, nor will I ever let any of my kids wear anything rude or crass or that breaks school dress codes, but within reason, they need to make as many choices as it is safe and affordable for them to make while they are developing that sense of self. Always having to be the domineering authority only pushes strong-willed children to resent any authority (my sister is the perfect case in point, but at 32 has finally settled down!).
Do what makes sense to you and keep the overall environment happy. You don't have to "spoil" your child, or let her be in control in order to keep the peace. Just set reasonable demands, and let your intuition be your guide!
Best to you!
A. V