when I was your daughter's age my parrents let me do what your suggesting. I didn't use stencles I just drew in pencle what I wanted to paint and then just painted using acrylic paints. Later I also did some work in oil pastels and with an airbrush when I was about 18.
any acrylic paints work well on wall surfaces, if she really likes the stencle idea then thick bristol board, a cutting board and an exacto knife should work pretty good to make your own. Craft stores would have pre-cut stencles.
I find spraypaint and airbrushes are great for stencles, or acrylic paint and brush or sponge.
If she gets bored of what she does it's pretty easy to sand the wall and put a coat of white over the area she wants to change. Mr. Clean eraser will get off pretty much everything including oil pastel.
I moved out a couple years ago but my parents never had the heart to paint over what I did, and I'm now in school to be an animator so I think they're glad they encouraged my love of art.
I hope your daugter gets as much fun out of it as I did, your cool for letting her do it.
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