Be glad that you got your daughters passport. I was speaking with my TA and was told that January 1, 2008 the government might finally enact the whole passport thing where she would need it. Just sent for my daughters even though right now she doesn't need it.
This is what I found on the Dept of State website. This covers Canada, Mexico, Bermuda and the Caribbean region.
LAND AND SEA TRAVEL
The following summarizes information available on the Department of Homeland Security’s website.
JANUARY 31, 2008
U.S. and Canadian citizens will need to present either a WHTI-compliant document, or a government-issued photo ID, such as a driver’s license, plus proof of citizenship, such as a birth certificate. DHS also proposes to begin alternative procedures for U.S. and Canadian children at that time.
At a later date, to be determined, the departments will implement the full requirements of the land and sea phase of WHTI. The proposed rules require most U.S. citizens entering the United States at sea or land ports of entry to have either a U.S. passport; a U.S. passport card; a trusted traveler card such as NEXUS, FAST, or SENTRI; a valid Merchant Mariner Document (MMD) when traveling in conjunction with official maritime business; or a valid U.S. Military identification card when traveling on official orders.
The implementation date will be determined based on a number of factors, including the progress of actions undertaken by the Department of Homeland Security to implement the WHTI requirements and the availability of WHTI compliant documents on both sides of the border. DHS and DOS expect the date of full WHTI implementation to be in the summer of 2008. The precise implementation date will be formally announced with at least 60 days notice.