What would happen if you gave your DSD the option of either bunking it with DS2 or having the converted room? Any chance of that being a happy arrangement?

Back in the day when we were fostering, we regularly hhad an extra child staying with us, and they were on a camping stretcher in a partitioned part of the lounge room. There was a concertina-ed door we pulled across to divide the lounge, and there was room for the stretcher bed, and a bit of space either side, and a little desk where they could put their bags ...

It was pretty make shift, but (like what you've done) we had little things to try to make it "homey".

Ultimately, there can be no real offence that there's not a dedicated room for an extra guest, and on the contrary, you're taking specific measures to try to help her feel welcome and at home.

She'll be fine