Wheel sizing for a petite-sized rider

I'll throw out my thoughts -- it depends.

Okay, more on that... For some one at 5' and a frame size of 44-ish cm, the smaller wheel will be by far the better choice. But it's going to come down to what you can find. Many manufacturers and shops will give all kinds of BS reasons why the 650's are "inferior". But the truth is that they just don't want to deal with designing or stocking around that size. In the smaller frame sizes for road bikes, it's imperative (in my opinion) for balance of the bike, handling, avoiding toe overlap, and being able to design the fit, I can't see how any manufacturer can in good conscience build they bike around 700's. Likewise, for tri bikes, once you get below about a 55cm frame size, you're making compromises to design the bike around 700's.

The smaller wheel size does have some advantages, though -- the smaller size is lighter, and has a lower moment of inertia. They spin up faster, and you can use a smaller rear gear cluster to get the same gearing range (thus lighter again). This is why I had my track bike built with 650's. At 5'10", I prefer 650's for my tri bike -- the rear wheel can be tucked in closer to the BB, taking some weight off the front wheel (and improving handling).

The biggest disadvantage is the availability of tires. And by that I mean sizes -- you'll pretty much be stuck with 650cx23mm. Standard for a road tire, but if you want something more forgiving for rougher roads, then...

I just finished building a frame for my wife (lkct01234 on this site), who is all of 5'3". This is an "all-road" kind of bike (gravel roads), so it's got wider tires, but I built it on 24" wheels (507, for those who speak the language of ETRTO). Built up it'll look pretty normal.

I'm 5'2" and my first road bike was a 47cm Specialized Ruby, with 700s standard.  My LBS fit me on that frame because I have a short torso, SO, I would recommed going to get her fit then go from there.  I would lean towards the 700s for her first just for the possibilty of resale (what if she decides she doesn't like it after all?)Availability of parts and pieces is what made my decision to stick with 700s for my tri bike. 

The first road bike that I bought brand new was a 2004 Trek 2200. It was 47cm with 650c wheels. The next bike I bought new was custom made bike with 700c wheels, so it doesn't really have a size. The next bike I bought new was a 2011 Cannondale Supersix. It is sized 44cm with 700c wheels. For me, 700c wheels are a must because I do mostly bike racing and neutral wheels are always 700c. Also I like the ability to change wheels with my SO. Anyway, I can't really tell the difference between the 47cm Trek and the 44cm Cannondale. There are little differences in fit, but neither held me back and both fit fine. Anyway, the moral of this somewhat too long of a post is that you can't always trust that the sizing will be the same across manufacturers and you are probably going to just have to get your daughter to ride some of the different bikes and see how they feel. I'm 5'2, btw, but have a longer torso proportional to my legs, I think.

Pretty likely that a bike with a  650 wheel set will fit her better.  Although each bike is different, and it depends.  

not uncommon for a bike shop to have the urge to 'fit' her on whatever they have in stock.