To make a paper doll chain, fold a piece of paper several times in a fan style, like this:
Draw the figure of a doll on the front of one of the folded sections, making sure the hands reach all the way to both sides. Cut out (but leave the folds intact!) Here's a template for a doll and dress if you'd like to use mine.
Unfold dolls. Let your little girl decorate the faces, etc.
Cut several dresses out of scrapbook paper or fabric (you might not even want to bother with the tabs because it can get a little tricky to work with all those tabs on a string of dolls)
Write a letter on each dress, and let your little girl arrange into words