It used to be that because of their small size, cupcake decoration of the cupcakes themselves was minimal, but could adhere to a theme. A single piped flower plus a particular color of icing might be what was on each individual cupcake. Also, cupcake picks with a decorative top. The common element was that these things were placed in the center of the cupcake, perhaps crowning a mound of icing, again, with the preponderance of the icing mounded towards the center. But now, people have gotten more elaborate with fondant figures and cake coatings. I can't tell you what to do, but I can suggest that you choose an overall "theme" for your daughter's party and have cupcake icing styles or decorative elements in line with the theme. For just a general "fancy" occasion, having frosting flowers on cupcakes might do if you're playing it generic and not too fancy. However, these days a lot of kids' parties are organized along themes. Does your daughter like animals? Cupcakes with plastic or fondant zoo animals might be appropriate. And then there are Sesame Street characters (a I know a Cookie Monster design with the top of the cupcake frosted to look like Cookie Monster's face, and a chocolate chip cookie put into the "mouth" has been quite popular lately) and licensed cartoon characters.
Does she like a particular childrens' show cartoon character? for instance, I'm sure a lot of kids your daughter's age might be having Dora the Explorer (only in New York does that rhyme) birthday parties with Dora paper plates, napkins, etc. Perhaps they sell Dora cupcake toppers somewhere? Or, if you want to get creative and play with fondant, maybe make little fondant figures of the Dora characters?