First of all, congratulations to your father for making it to the top of the transplant list. I hope your ordeal is over soon with a good liver, a perfect match and a good acceptance by your father's body.
Like Valerie B, I was diagnosed with cancer (Stage II Hodgkins Lymphoma) when my children were very young. Our daughter was 10.5 weeks old, and it was the day before our son's 2nd birthday.
Honesty is always the best policy when dealing with something like this. We took the kids to appointments, chemo sessions, etc. Our son knew Mommy was sick, but he had no way of knowing what cancer was, how dangerous chemo is and how their harmless germs could cause a life-threatening infection.
What concerns me most about not being general and honest is that she'll be afraid of doctors should there be complications in your father's transplantation process.
I'd also be very honest about the process of recovery - why he'll always have to take medications, why he may not be able to give hugs for a while (infection risk), why he'll spend so much time in the hospital, why he'll go to the doctor's office so much.
At 3.5, she is much wiser than we think, and she'll comprehend a lot of what you tell her - plus, she'll be a HUGE source of comfort for the entire family because she'll be a reason to rally around him during his operation/recovery.
Best wishes to your whole family!