Printerman,
If she is a nice neighbour then the first thing to do is to talk to her about it. After all, if she is out leaving the stupid mutt alone all day then she may quite surprised to learn that it is barking all the time and may bend over backwards to sort it out.
If she fails to suceed in making arrangements that would consistently end the barking then you could make some friendly but serious remark such as, "there are types round here that would report you to the council" - only worded better

. Maybe point out about those anti-barking devices that are available.
If she still does not do anything about it then do not feel guilty. Go right ahead and report her to your local council's environmental health dept. If she is worth anything then she should have done something about it when asked nicely (if she comes battering your door to moan at you then you can safely deny it was you who reported her). There is sometimes a form on the local council website for reporting nusance noise etc. Initially you don't have to have a diary to back up your alegation (just typical times/days will do at first, what the noise is and how it affects you). They will send her an initial polite warning letter with useful advice. Your neighbour will not know who made the alegation. You will also receive a letter confirming your compaint along with information on what to do next if the noise persists (usually invovling filling out a diary sheet). They may then write to the offender again, or visit and may come to you to take decibel readings if they need some more concrete evidence for court. If the council don't hear from you again then after a certain period they consider the matter closed (and you'll have to start again with the complaint procedure if the noise starts up again months later). There maybe slight variations depending on your locale.
We had exactly the same problem. Twice.
First was a neighbour with two dogs (yappy and woofy-wimper) left alone in the garden for long periods. Actually we didn't get chance to complain although we did make some friendly comments about "concern" but the noise continued. Some other neighbour must have reported them or had words because eventually the noise stopped all of a sudden (only make the occasional noise now and again). Yappy died and they only have woofy-wimper now, so that might have helped too.
The second one was someone in the next street who let their loud dog wander between the open rear garage door (presumably its kennel) and the garden but only at times when they were actually in (relentlessly between late afternoon and mid evening every day and sometimes all weekend daytime) so just how they could sit there and ignore it was beyond me. It would bark at the sky, bark vicously at people walking down the ajacent path or bark just to prove that it could bark. It was loud relentless and echoed round several streets. You couldn't sit in your garden or have the patio doors open because of this noise. It's a reasonably nice peaceful area and they seemed like filth so I just reported them via the council website and the noise stopped. Like magic. I think there were still a couple more barking marathons when I think they were still taking the pish on odd days here and there in the weeks after they received the letter but we've hardly heard a wimper now for ages (hopefully its dead or gone).
Note that it is often very difficult to diary-document dog barking. I mean, are many batches of barks seperated by ocassional half hour silences during the course of a full day considered seperate accounts of barking or simply all day barking? I would go with the latter otherwise you are constantly chasing the diary. You could back it up with a typical recording of a complete barking mad day (easily done either as a medium or low quality MP3 on the PC or use a video recorder using a 4 hour tape on long-play (requiring something to pre-amp the microphone to the audio line-in of the video). Stick the mic near an open window.
Good luck.