I agree with above.
Your poor daughter is in danger of becoming the family scapegoat for no good reason and that is not a happy or positive place to be.
The way your father scolded her was horrible, intolerant, and not his place. It is your place and you should be speaking up for her, not letting him upbraid her like that while the cousins looked on laughing.
The fact that your sister spoke to her so harshly about mere dancing around in her own home is awful and she also had no right to do it.
Your niece has witnessed how they speak to your DD and now feels that she can criticise her in the same way with no comeback. Your DD was showing a bit of creative imagination, thinking of something fun to do, what a gift, and yet her ideas were put down and sneered at by people who just sit there doing nothing and like to imply that they are superior.
These negative attitudes towards her won't stop unless you stand up for her when its happening and tell them to mind their own business. Did your father and sister also behave like this to you when you were growing up?
Please protect her from this. Young children are so sensitive to these kinds of comments from people they are supposed to trust, and respect, who are supposed to care for them. It sinks in and damages their confidence. If she gets reactions like that from family, it will affect how confident she feels at school.
Let her be a child, everyone is different and she doesn't have to conform to your family's harsh judgment. What makes their opinion more valid than yours? Children develop at different speeds and she will mature in time. So what if they think that is not fast enough for them. It's none of their business and it's not like she was doing any damage. If your sister can't take a bit of dancing, she is the one who needs to grow up and learn to be more tolerant.
Personally I would steer clear of them for a while and let your daughter find as many activities as possible to build her confidence, around people who encourage not criticise.
Also. If she's keen on the piano, there are many many You Tube tutorials that she could start off with and a little second hand keyboard to practice on. There may be opportunities at school. Or a guitar. If she learnt a new skill it would improve her confidence.