OP, is your DD currently at a private school? Schools have to have a SENCo so I'm not sure how they've got away without one for two years. It definitely sounds as though your DD has slipped below the radar as there's no way, unless they're having a particularly bad day, that a 7-year-old should feel that sad about school and that reluctant to answer questions.
From a teacher's point of view my first thought was to wonder what questioning techniques are used in class e.g. is it a 'hands up if you know the answer' approach or more paired talk, use whiteboards to show ideas etc.? I make a point of asking questions that don't have right or wrong answers and tell the children this but also work with pairs containing less confident children to reassure them that their ideas are good ones to share and that I'd like them to tell everyone once we're sharing ideas in a whole class group again.
Unfortunately the elements of the assessment that are going to stick out are the negative ones and I wonder if it might be helpful for you and your DD to create a special scrapbook about all the things she IS good at. You might want to include a photo of her as a baby and then perhaps some post-it notes/labels with reasons you loved her when she was a baby e.g. super sleeper, gave Mummy massive smiles, giggled when Mummy tickled her etc. etc. Another page could have a current photo of her and you could work together to come up with things she's good at; being kind, trying hard, brilliant ideas, excellent on her scooter etc. Try to get into the habit of adding something every day, perhaps at bedtime so that before long she has a book packed with all the things she's best at/brilliant at.
I've done something similar with the Y5/6 classes I've taught and it always goes down well... the children write comments about each other so they vary from 'tells the best jokes about farts' to 'always spoke to me in Somali before I knew any English'.
It might be worth telling her current teacher how down she is feeling about school and asking her to look out for one thing each day that could be added to her 'me book' - it could be jotted on a scrap of paper or told to you when you collect her and added when you get home.
Go and visit some other schools and ask about the type of support they would expect a child like your DD to benefit from and then ask the Head of her current school if/how they could offer the same. Ultimately she may benefit from a fresh start at a school that are rather more clued up about dyslexia and self-esteem but her current school still need to challenged on their lack of provision.