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I saw a similar site a while back that took a slightly different approach to making real-world items from kids drawings that probably works better in this regard - they turned them into jewelry for moms in the form of necklaces and pendants.

I don't think the site is around anymore, though. I believe it was just one person making them.

I suspect this varies from child to child. My older son would really dig this, as he often sketches something out then attempts to build it (whether it is with legos, blocks, wood, found items in the cellar, etc).

Maybe it's not as hopeless as you think. (Sorry, couldn't resist, what with a name like that!) I could imagine many young children being astonished at seeing their 2d pictures come alive. Perhaps as a reward for good behavior, you could actively solicit drawings from your daughter to be made into a toy.

On an unrelated note, how about adding a rapid prototyping lab so that you can create plastic as well as plush toys from kids' drawings?