Hi Shell,
I would keep asking why not the arm, a lot of pump users have it in there arm, if she's fine to inject there she should be fine with a cannula in. It may just be because her arms are so small that they aren't happy about using it there, Stick a post on the parents part of the forum there's a few who have pumps on there ask if any of there kids can wear it in their arms. Omnipod might be a good idea as when I have my pump on my arm I usually tuck it in my bra or have it strapped on my arm it might be a bit to bulky strapped to her little arms. make sure sites get changed regularly as she will have it for the rest of her life, keep the scaring to a minimum, but I'm sure once she's up and running she'll have more confidence and will eventually take over putting everything together and trying new areas like her tummy.
Good luck with it all.