I’m so sorry you are facing this.
I tend to err on the side of more information, because I would worry that without it, she would gradually absorb the understanding that her father’s behavior is normal. And then when she’s older and has already accepted it (and possibly figured the other details out before you could tell her), it might be harder to convince her that your perspective is correct.
My explanation to a 7yo would be something like, “You know how many children have a mommy and a daddy who live together and who love each other? Well sometimes people who are not married want to act like they are married. It’s not right to do that, because God made men and women to get married to each other (let child respond about how much sense that makes), but as you know, sometimes people do things they shouldn’t. (you can talk about wrong choices that even children make, and say that sometimes adults make very big wrong choices) Well every now and then, a man will want to act like he is married to another man instead of another woman. That’s wrong too - because God made men to marry women, not other men. (let child respond about how much sense it makes, given that babies come from mommies) Daddies should be married to mommies. But sometimes people’s thinking doesn’t work quite right, and they get mixed up. Daddy is one of those people. For some reason, he wants to act like he is married to this other man. I am sad for Daddy because I know that it’s not good for him to want to act like he is married to another man. But I think that his thinking is mixed up, and I hope that someday his thinking will get un-mixed up. You can pray for his thinking to get un-mixed up someday too, but you don’t have to worry about it. Even though he’s your daddy, he’s still a person, and sometimes people make wrong choices.”