The Atheist Father's Dilemma
I don't really understand how anyone could advise him to anything but sit her down and tell her that it's all fairy tales. And don't say that it would be traumatic, because it's no more traumatic than finding out any other imaginary creature doesn't exist. She'll be hurt, but she'll get over it.
And I don't mean in one fell swoop, but teach her about the natural world. Don't just say evolution is true (etc), show her. Go to a natural history museum, by her books (appropriate for her age, not The Blind Watchmaker), teach her about the world. But not just that, teach her critical thinking. Show her how to tell the difference between a claim that should be taken seriously and one that should be dismissed. You don't even have to mention god or Jesus or anything about religion. Because the fact of the matter is once you have the critical thinking apparati and the basic knowledge in place, you just can't take religion all that seriously any more (and those few that do, like Ken Miller, just look awfully conflicted doing it).
That's my two cents on that story.