Children have trouble with the notion that they must share their parents with another being. The world they once new as predictable and stable becomes uncertain and ever-changing. Although you can't eliminate all of the obstacles they have to overcome with a sibling's arrival, there are ways to soften the blow.
1) Prepare your child beforehand by telling her, in an age-appropriate way, what to expect -- how the baby will impact each member of the household and the family in general. One of the best ways to do this is to pose open- ended questions like, "How do you think things will change when the new baby comes?" "What are the good things that will happen when it comes?" "Do you have any worries about it? If so, what are they?" "What will it be like as the big sister/brother?" "How do you feel about the new responsibilities you'll have as a big brother/sister?" "What are the good things about being a baby?" "What are the bad things about being a baby?"
Many of these questions can help you determine just how much your already knows, whether she has any misconceptions you need to clarify, etc.
2) When the baby's born, point out how being a baby isn't all it's cracked up to be, despite the fact that it's held a lot and receives a great deal of attention. This not only shows her you understand and respect the difference in skill level between big sister and baby, but also encourages empathy. "I feel sorry for your little sister. Gosh, she can't eat anything she wants; she can't run and hop and jump; she can't help Mommy' she can't play outside with her friends -- she can't even walk! And she doesn't understand a word we say!"
3) Let her know you sincerely need her help (even if you don't.) Put her in charge of little things like bringing you the diaper, sprinkling on the talcum powder, picking out a clean set of clothes, lathering the shampoo while you hold the baby, etc.
4) Invite her to help decorate the baby's room, pick out crib linens, nightlight, etc.
5) Let her know love is something that grows when it's divided -- you will love her as you always have. When you tuck her in at night, share some of the things you think are special about her.
6) Establish her own personal "Buddy Day" when you take her on an outing once a week (without the baby) to go eat ice cream, get groceries, go to a movie, or something else short but sweet. Make up your own secret Buddy Day handshake and saying. Let her know that her little sister isn't lucky like her, because she's too young for Buddy Days.
7) You have to time this one just right, but it's very powerful: when the baby is crying just as your eldest is leaving the room, say aloud: "It's okay, (baby's name), (older kid's name) is coming right back." This way, your child feels her baby sister loves and needs her. These seven suggestions won't guarantee your children will throw rose petals before each other's feet or that they'll spend their entire lives argument-free. They will most certainly have their fair share of tears, slaps, name-calling, tattling, and fisticuffs, but if you remember that childhood is the training ground for developing strong interpersonal skills, the chances of you going completely bananas is remote indeed.
Look upon their disagreements (euphemism intended) as something that will galvanize their relationship to endure a lifetime (while you toss them both outside and say, "You're disturbing my peace. You can come back in when you've worked things out." Think of all the peaceful bubble baths you can enjoy while they're hashing things out.