I'd be tempted to 'trap' the teacher and buy a cheap hair thingy (or whatever!) that looks like it might be something that your dd has made, then send her into school in it...
Then when the teacher complains about it and makes her remove it, muttering about home made things, you can reply that it's shop bought and that as other dc are allowed to wear shop bought things why is your dd not allowed to? And seeing as she is unable to tell the difference between shop bought and home made, why is she stopping the home made stuff?
I would definitely pull her up on it - if not to her face then if you are talking to the head teacher, I'd throw it into the conversation that she seems to be picking on your dd and that you suspect that it is because your dd is crafty rather than academic - that you are really surprised because you were so pleased when your dd got her as she had taught your older dc so well, but you are shocked that she is behaving like a completely different teacher to your dd, confirming the playground rumours that you had previously heard and dismissed.
ds1 had a teacher who just didn't seem to like him, put him down, just made his life in Y1 miserable. It hadn't helped that ds had missed the first 10 days of school due to a really nasty bout of chicken pox which had come out the night before the first day of term - so he went back still with scars and the sort of tired you are after having been ill for a while, you could tell he he wasn't at 100% but she treated him like he had been off for an extended jolly and didn't support him settling in - whereas beforehand the school had been telling us how they supported the first couple of weeks transition between reception and y1, his classmates got it and he was expected to drop in perfectly, regardless of the fact they'd muddled all the classes up so it was all new.
Anyhow, it was a miserable year, I wished I had been brave enough to confront the teacher or say something to the head but I didn't. It was only the next year that I discovered that most of the other parents felt exactly the same way - but we all suffered in silence. If we had talked and done something maybe something could have been done about her earlier.
When ds2 was at the school a few years later, I did put in a request that he wasn't put with this teacher. I did it informally as by fluke I happened to have a chat with the TA just before she went to the meeting they were deciding on the next year's classes - but if I had realised that they were going to hold the meeting earlier I would have made a formal request.
However, talking to a friend who's dd got put into her class that year, I commiserated and asked her if she was going to try to get her moved if any spaces came up, she was shocked I'd said anything as her elder dd had had a great time with the teacher the year before (different year from ds1 being with her). I suspect that there is a small but significant group of teachers that are marmite like this - you either love them or hate them, and they either love you or hate you (well, your dc) and that affects how your year with them goes.