Ok, solution time.
Here are the two ways I'd do it:
Ubuntu. Not the best solution from what you describe.
Or...
Install XP and all apps. Use Norton Ghost to make a copy you can store on a DVD, stash that DVD somewhere safe. When kiddo nukes the system again you can rebuild in minutes rather than hours.
Next, install a 2nd drive and mount the filesystem it to the working system without giving it a drive letter (it shows up as a directory under C:\ instead). Mount it as "c:\documents and settings\<kid's account>". Therefore, ALL data she creates will be stored on this 2nd drive, even stuff on the desktop. I've done this before and it works well. I mounted my 2nd drive as the "My Documents" directory, but there's no reason you couldn't do it for the user's entire "home" directory. BTW, at work, our Unix home directories on any given system aren't on the physical system, but NFS shares on a SAN. That way, no matter which system we're on, we have our normal home directory.
Next, install a third drive and have windows mirror these two drives or install some sort of automagic folder syncronizing software to make sure all contents of the 2nd drive are copied to the 3rd drive. That is your data backup. The third drive could even be a USB external, though that would work better with the syncing software. I think mirroring to a USB connected drive would slow the system too much since it's done in real time.
When you have to rebuild her computer, her data will be safely stored on the 2nd drive (and 3rd drive if you go that route).
It'll be a bit of work to set up, but it'll make restoration easier. If you do this, I would hold off on the Ghost imaging until after you get the other drives configured as well so a restore won't blow away the mount points. You "Ghost" the system after all configuration is complete, just before "handing the keys" to the kid. You could even ghost the system to the 3rd drive and run the restore from there in the future.
Chris