Reddit mentions of Biscuit (My First I Can Read)

A book (or a few books) are nice. You could go with some traditional story books, or learning books. My daughter loves looking at books. These are some of her favorites:

http://www.amazon.com/First-100-Words-Bright-Baby/dp/B000F7BPCU/ref=sr_1_1?s=books&ie=UTF8&qid=1312305286&sr=1-1

http://www.amazon.com/Animal-Book-casebound-Board-Books/dp/0312511078/ref=sr_1_1?s=books&ie=UTF8&qid=1312305354&sr=1-1

http://www.amazon.com/Biscuit-Alyssa-Satin-Capucilli/dp/0064442128/ref=sr_1_7?s=books&ie=UTF8&qid=1312305382&sr=1-7
(there are lots of "Biscuit" books, this is just one)

Another suggesting is LeapFrog's Violet. It's a toy (I know your bro said no toys), but I have to tell you that my daughter LOVES Violet. You can program her to know your niece's name and say it and sing songs with her name in it. You can change the songs that are played, Violet's "favorite" colors, foods, etc to match with whatever your niece is into at the time and so much more. My daughter (22 months) goes through phases where she's literally attached at the hip with the thing. Here's a link: http://www.amazon.com/LeapFrog-19157-My-Pal-Violet/dp/B001W35I8I/ref=sr_1_1?s=books&ie=UTF8&qid=1312305595&sr=1-1

Another idea is to get one of those Hallmark recordable books and record yourself reading a story to your niece. I did that for my daughter's 1st birthday (there's a little dedication section too) and my husband did one for Christmas. Here's another link: http://www.hallmark.com/online/in-stores/storybooks/recordable-storybooks/

All of these things are $30 and under, so hopefully you can find something to fit your budget. :)

Not Afraid of Dogs might be very relevant, about a boy who overcomes his fear of dogs when he discovers a visiting dog is afraid of thunderstorms.

Little Dog Lost is a sweet book based on a true story of a dog's rescue at sea, with a very happy ending!

Good Dog, Carl is an almost wordless story told in beautiful illustrations about a dog left in charge of the baby while the mom goes out, and all the mischief they get into together. The dog is a big rottweiler, so the depictions of his gentle interaction with the baby might be especially helpful. There are also a bunch of sequels (Carl Goes Shopping, Carl's Birthday, etc).

Officer Buckle and Gloria is a hilarious story about a police officer whose safety talks are made entertaining by the silly antics of his police dog (not portrayed as scary at all).

Martha Speaks is a classic, about a talking dog who saves the day (if rather unrealistically!). I believe there have been a few sequels written as well.

Excellent Ed is another very silly story about a dog trying to figure out what he does best.

In terms of early readers, the Biscuit series features the adventures of a cute puppy, and there are TONS of them. Henry and Mudge also features a dog, at a slightly higher reading level.

If you're looking for true stories told in photos, Tuesday Tucks Me In is told from the perspective of a service dog to an Iraq veteran, and Tarra and Bella is a true story about a dog who befriends a lonely elephant.

May I Pet Your Dog is a great book that teaches kids how to safely meet a new dog (holding out your hand to sniff, etc). Probably not the best to start with, since it does mention unfriendly dogs and what to do if you encounter them, but once you work up to meeting some dogs this might be helpful.

Lastly, though it's not about dogs specifically, Fraidy Zoo is a fun book about a girl who is afraid of the animals at the zoo and how her family creatively helps her overcome her fears!

These were really popular when I was a kid and they are first grade reading level. You have to remember that kids books are short because they are working with the attention span of the typical child that age. I loved these books and I was reading at a senior level in third grade.