When my daughter touches any object with the pen nothing happens. It will keep telling you to touch a picture on the screen with your pen.

You need to recalibrate. Try pushing B, A, Hint, and Home when you turn it on. Do not have a cartridge in the player or it will think it is a regular Leapster. Once it says calibrate screen it will say to press A, then wait until a target appears in the upper left hand corner, touch it and you should hear a sound, then a new target appears in the lower left hand, repeat actions, then lower right hand screen, and finally the upper right hand screen. If it stops at any time and doesn't get more arrows, try it again or turn it off and see if the pen works. It may take a few tries to get it to recalibrate correctly.