Re: dollhouse or American Girl doll for 7 YO?
Both would be excellent gifts - I don't think you can go wrong with either one.
An AG doll is not really comparable to a bitty baby doll to a 7 yr old. The doll is a 'grown up' girl like them. They play totally different with them than a baby doll. If your dd would want to do stuff with the hair - save your money and get it for her in a year (or whenever) when you can get a real one. The knock offs have terrible hair. But a knock off is a great way to judge if your dd will really play with a doll like that before making a big investment. We got dd1 a knock off first to see if she'd really play with it and if she'd play nice with it. She was very gentle with the doll but within a month I had to braid the hair and we never touched it again so dd couldn't brush the hair anymore. She didn't care - not her thing. Dd2 loves to brush dd1's dolls hair though.
Dd1 (who is 8) also loves to play with a small dollhouse (like calico critter size house) but she's always preferred small people to big ones. (she plays with squinkies more than barbies). While dd2 likes barbies better than the smaller people. So the kind of dollhouse you get kind of depends on the kid. Your dd sounds like she plays better with a big dollhouse. Dd1 is 8 and shows no signs of being done playing with a dollhouse type toy.
So that was a long post to say your dd would be happy with either toy.