We are very open around our house, so it shocked me that I would feel at such a loss for words and so uncomfortable talking about this. Any advice you have would be great. I guess what I'm asking is, how much to tell her and the best words to use. Thanks!
By introducing the notion of a married couple having sex to create a baby, you took your daughter's question into a realm that she wasn't asking about. Now you find yourself having to answer questions about having sex. The lesson here is to find out first what your child knows about the sexual question she is asking; then, give her simple, honest, age-appropriate answers to her specific questions, without elaborating on more information than she requested.
As you give your daughter the correct information about where babies come from, use the accurate words to describe the process--uterus, vagina, etc. As you discuss the sex/making love that makes babies, also use the correct words--penis, sperm, egg, etc.
Certainly, underscore the values that you attach to sex with your explanation of the sexual act. A description of sex, one you have referred to as "clinical," should always be accompanied by language that emphasizes the loving expressed during sex between a mommy and a daddy. Children will only take in as much information and detail as they are able to handle at their stage of cognitive development.
I wouldn't have the "big talk" with her about this topic. I'd have a series of shorter discussions and always take the everyday opportunities presented to you (a pregnant relative, a newspaper or TV story) to extend these talks.
A child's sex and sexuality education is an ongoing dialogue, throughout her childhood. Here are a few books that will serve as fine resources for you: Flight of the Stork by Anne Bernstein, Did the Sun Shine Before You Were Born? by Sol and Judith Gordon, and When Sex is the Subject: Attitudes and Answers for Young Children by Pamela Wilson. The Planned Parenthood Federation of America has many helpful resources as well.