This all sounds really normal - it was exactly DS1's reaction to DS2, anyway (and DS1 sounds a similar personality to your DD). He adores DS2 and has done since day 1, but his general behavious deteriorated massively after DS2 was born, and he just seemed miserable.
As others have said, the main thing that helped was time, but in the meantime we did eventually learn a few tricks to keep him happier. I abandoned the naughty step completely other than for physical aggression (he's not an aggressive child, so I used it very rarely), and focused entirely on positive discipline - at one point he was getting a sticker for every half hour that he'd managed to behave (the consequence of not behaving was only no sticker and an explanation as to why).
We had ringfenced mummy time every day, even if it was just half an hour. We bought a book of craft activities to do together. DS1 still refers to it as "Our Book". He would chose what we were making next, and the night before DH or I would get everything prepared (shapes cut out, paper and paint ready etc) then we'd find time, e.g. while DS2 napped, to make something together. He loved these sessions, and I think having actual "output" helped too - we'd put the pictures or whatever we'd made somehwere prominent, and talk about how we'd done them, or I'd tell stories involving the things in them (we made a lot of rockets, trucks, boats, submarines etc!) while I was feeding.
Later on I tried to involve DS1 in whatever everyday tasks I had to get done - e.g. he'd help me cook the tea during DS2's lunchtime nap, help me put loads of washing on etc. It was a bit of a nuisance as it would have been much quicker to do these things all myself, but I do think he got a lot out of feeling involved.
I got organised about toys, so that I could try to give him focused activities to do even when I couldn't help. His behaviour was much worse when things were a bit 'aimless'. So I put the lego up high, and jigsaws etc out of reach, and then used to get these things out at specific points in the day (if he had access to them all the time he just lost interest).
HTH. It really is mainly just time.