I greatly appreciate all of the insight and suggestions everyone posted. I feel inspired to try some new tactics based on several of those suggestions. Just coming at her from a different angle might help break through her stubbornness.
DD refused to read the word "the" tonight and choose to go to bed early rather than read her simple reading assignment. We had a wonderful day leading up to this point so I'm confused, as always, regarding why she chooses to dig in her heels and turn on the game.
I snuggled in bed with her for yet another heart to heart regarding the "pretending" game. I didn't get any new insight, but I tried to assure her (yet again) that demonstrating her knowledge is a good thing. It will earn her praises from myself and her dad, her teachers will reward her with more challenging work, friends will be impressed, and she will set a good example for her little sister. I also tried to squash any fears regarding losing help and/or attention from those around her. I told her we will still read books to her too, we will help her with the big words, etc. We also discussed getting positive attention instead of negative attention and that there are games that are fun/funny, but this is not one of them. She promised to do the assigned reading tomorrow without any dramatics, but I will believe that when it happens.
After reading many of the posts I believe testing would be an expensive and frustrating effort that would probably not illustrate her true abilities. Therefore, waiting is probably my best option at this time.