Hello. I cannot find this movie:
King found a baby girl in forest. He and the queen raised the baby along with their daughter.
Adopted daughter saw the princess as her rival. Princess always hid in attic and found a doll/puppet. The puppet can grant wish.
At one point the adopted daughter transformed into a dragon and attacked the princess. The dragon eventually killed by the hero and adopted girl transformed back into her original form, which was a wolf. Her wolf family came to collect her body.