I think you and your daughter might feel better if you spent more time with families whose children had learned to read at a variety of ages, or are learning to read at a variety of ages. Her crisis of confidence is happening because some people around her are overemphasising the importance of early reading. Maybe society at large is to blame. In many circles, reading is considered the litmus test of education for young children. People worry excessively that a child will "fall behind" and never catch up, and are not prepared to wait until the child is developmentally ready. This is giving her a distorted idea of what is "normal" and necessary.
My older dd's experience of learning to read was somewhat similar to that of your daughter. Reading didn't come easily to her. She was keenly aware of others' abilities in relation to her own, and this was hard for her. She decided to learn to read at 6.5 and the impetus was always from her rather than me.
There were two differences, however. First, my dd is not what I would call "oppositional"; in fact she used to be rather too compliant for her own good - I don't know whether that is at all relevant. Second, although she was keenly aware of some friends who had been reading fluently years earlier than herself, she also had friends who found reading more of a struggle than she did. So she felt herself to be on a spectrum of reading abilities rather than at an extreme.
She slogged along at it from age 6.5 to 9, never giving up but making very slow progress. She could decode easy words, but it was a big effort. She found it tiring, lost her place whenever there was much text on a page, and said the text was too small. The simple stories she could manage were not interesting enough to quench her thirst. The stories she yearned to read took forever to plough through, and she lost heart within a few pages.
Around her ninth birthday it all fell into place and she began to read entire books in an afternoon. Within a year, she could read as well as the average child of her age. Looking back, it seems clear to me that she was not actually ready for reading until the age of nine, and most of the effort she expended before then was as useful as trying to teach a two month old baby to walk.
I wish she had felt able to wait until an age when reading would come easily. But that was never going to happen in her case. An awareness of other people's expectations ensured that she felt under pressure to try to master reading at an early age. From the time she was four, relatives had been dropping hints in her presence and asking outright whether it wasn't high time she learned to read. And of course she very much wanted to read.
For some reason her self-confidence didn't take too big a hit. Maybe it was my constant reassurance that she'd do it when the time was right. Maybe it was being around other home ed kids who also couldn't read yet. I am convinced that being at school during these years would have been a demoralising experience: the numbered stages of books which would make it so easy to compare herself with the child sitting next to her, the assessments and "extra help" she might have received, the fact of being presented with written instructions which she could not understand... being subjected to all this on a daily basis would confirm that yes, life is all about being able to read and no, she was not a success.
If you and your daughter want some reassurance that she IS making good progress in learning to read right now, I recommend Jim Trelease's excellent book "The Read-Aloud Handbook". Ignore the odd title; this is no plodding users' manual. The book is a very persuasive argument for reading aloud to children. Doing so exposes them to complex grammar, a range of vocabulary they wouldn't encounter anywhere else, a vast amount of general knowledge, and most importantly the great pleasure of books. These are all tools which your daughter will bring to bear on the task of learning to read. Decoding words is only a part of the reading process. If the time isn't yet right for your daughter to decode, then she is doing a very sensible thing in choosing to put that on the back burner while concentrating her attention on acquiring all the other pieces of the reading puzzle, namely the skills she will gain by listening to you and to audiobooks.
And if your courage needs bolstering further, try asking around on all the home ed lists you can find. Ask whether anyone has a child who is not very disabled who has reached adulthood functionally illiterate. Ask whether anyone has even heard of that happening. In all the many discussions I have had, and heard, and read in the last ten years I have yet to hear of such a thing happening. It is true that children often learn to read far later than reading is taught at school, even well into their teens. Admittedly, in our society this would test the nerve of any parent. But as far as I know, they always do learn to read. And, unlike at school, the age at which HE children master reading seems to have little correlation with their academic success. It is remarkable how much we fear the prospect of our children not learning to read, considering that it is a vanishingly rare occurrence.