First grade might be slightly young--but probably not, for your niece--for Where the Mountain Meets the Moon, by Grace Lin. The protagonist in that makes friends with, and is accompanied for the rest of the adventure by, a dragon. The story weaves in folktales that people tell, represented in the book in a different font, and there are illustrations by the author. I loved it (reading it as an adult, but my nieces-in-law--which is to say, the daughters of my brother's sister's brother) read it/were read it at an appropriate age and loved it. If she likes it, there are two more books in the series.

You look beautiful in the photo!

Also, you were so cool to place yourself in that manner into the Prydain chronicles. When I was reading them, I hadn't yet intuited the power (and emotional truth) of choosing such an ambiguous lineage on the D&D alignment scale. I took the most crippling straight-edge characters and wanted to be them (but in my own gender)--so, a female Adaon or a female Gwydion. (This abruptly ended in adolescence.)