I just made and gifted a dress to sweet little Reagan, one of my son's friends. I used the Smocked Sundress pattern from Weekend Sewing and it turned out super cute.
I didn't want to limit the life of the dress, so instead of hemming up the bottom, I did a wide pleat along the hem (perhaps there's a technical name for this...). The hope is that as she grows taller, maybe her Mommy (or me) can let the hem down. Besides being practical, it gives a nice weight to the bottom of the dress and helps it hang nicely.
Oh, and with some extra fabric I had, I made a little drawstring purse to go with the dress. A girl can never have too many purses.