Hi Ephie
As a kid whom at age ten was given up and placed in foster "lack of care" as I call it :) that which bothered me the most was one, no one EVER explained to me why I was sent away (7 of us kids in all) and two, on occasion I could visit my mom (who was still a drunk) yet.. not live with her.. that to me was almost worse than if she were dead. at least, then there would be an excuse. but to know a parent is still living and is choosing substance over you, it does sting.. so I can relate to your situation with your niece...
now.. what would have helped me most as a kid... a few things.. Although I was sent to therapy (it's par for the course in foster lack of care) the therapist NEVER explained anything to me.. I was too young to know where to begin and too, trained as a child living with an alcoholic that you don't ask questions......... therefore, for years, I never did.. I went along with the program... Which leads me to this.. while your niece is still very young, keep the lines of communication open, allowing her to ask questions as she sees fit.. if someone had done that for me, it would have helped. but in my case, I feared that IF I asked I was be punished (As had been the case, when I did question my mom's drinking)
additionally, when you do make that book, allow your niece to make one as well.. I think that will allow you to know her point of view as kids that age don't have the vocabulary to really say how they might be feeling deep down..
I would also add that it's important to emphasize the positives.... when a young person is given up by a parent, the shame can run deep. I know it did for me, despite it being my mom's problem. I blamed myself.. therefore, it's important that your niece have a safe , loving environment where she can shine (which sounds like your home is)
There will come a time when she is older and might say, why can't I live with my mom, or my mom didn't want me or chose addiction over me... but with that, emphasize that ok true...(which it is and at some point you will have to lay your cards on the table) as children will eventually demand the truth of the matter.. let her know that you chose her and that she is loved... had someone ever told me the truth of the matter and that I was loved.. WOW WOW.. what a difference... but in my case, my mom gave me up and I was placed in an abusive foster home.. It's hard to imagine that had I been placed somewhere positive, what a difference it would have made. In your nieces case, she is with someone who loves her and Ephie while that might not seem like enough now.. I can assure you this, during my stint in foster lack of care (about 7 years) whenever I did meet someone who was positive and who reminded me of how special I was, to this day, I remember it..... children, even if they do act out, do remember kindness.. and while no one might be able to replace a kid's parent.... it's important to show the kid that hey, your mom might be an addict... but I love you and you are above all WANTED....
Continue to be a good role model for your niece, involve her in activities where she can develop herself. I think it's thru self-development that kid's discover what they are good at and in the interim it helps build self-esteem... Keep encouraging her, remind her that you are on her side.. At such a young age, I think more than anything LOVE is key.. as corny as that sounds. :)
Lastly, therapy can be helpful.. IF you find the right person... they are out but I think you have to shop around.. There are going to be many bends and twists on your niece's journey but as long as she has someone like you on her side, I think she can be ok... I am thinking positive for her and you :) Despite all the rough patches in my younger life, I lead a drug free, no drama, beautiful life.. I feel blessed .. kids are more resilient than we might think... Be strong for your niece... and in the end, she will be strong as well..
my best to you