HI,
I think it is best that you came out to your daughter, so she doesn't keep living in the fantasy world. I think the earlier the better for the kids to know. At a younger age they don't even realize gender...I have kids ages 12, 10, 8, 6, 4, 3, and 3....I was married for 12yrs. My marriage hadn't been good for a long time, and I finally decided to make changes and one of them being who we were going to move in with. My kids handled it great, they were sad about a divorce and me leaving their dad, but they coped and I think it is because I have always been so honest with them. They may not agree with me leaving their dad, but they know I needed to, and I am happier now. I think honesty is the best policy and I think your daughter will be okay, just remember to keep the communication open with her....
Good Luck,
Eileen