Please do not treat that child any different from the other children. She hears and understands everything that you are saying to her perfectly well. She just can't put her syllables together yet. I researched Webmd.com and several more links that it took me to and it shows where 1 out of every 100 children have these syptoms, mostly boys.
Based on the way you wrote your request and ended it with your intelligent daughters, it seems you, and probably others, have already diagnosed her and she can tell, that's why no kisses. Her parents and everyone around her should be working with the speech therapist and praising her every time she makes an effort to speak. Yes, she may need further help so that she won't be behind in school, but whatever she needs, be sure to let her know everyone is there for her.
I kept my grandson while my son and daughter-in-law went to work. He had that same speech problem, but can use the computer and game systems just like 10 yr olds. The only thing different about him was his inability to make the right sounds. Everyone I talked to about his situation said just wait, he will talk later. His parents were in denial and said to wait, but I convinced them to get him a speech therapist just in case. (First he had to get a physical to make sure his hearing, eyesight, and health were find). The therapist worked with him on syllables until he turned three (the age limit she was allowed to teach him). First she started with one syllable words, then two and three). At the same time, she was teaching him sign language. Sign language is find, but I told her I would rather she teach him how to speak the words. It seemed she didn't make a big difference, but a month later we put him in a pre-school and in one week, the words that the speech therapist were trying to get him to pronounce, he started saying them. I'm not sure what boost it, but I guest it was his time. It's not perfect, but at least we can make out what he is trying to say now.
I also spoke with a specialist and she told me to rock him as much as I can to enhance the neurons in his brain. Now you know every time I saw him, I was rocking him. I had his mom and dad rocking him, PaPa, Granny and more). Ha! Ha!.
Good Luck with your Niece.