"I'm not looking for money here," Roberts said of why she wanted the settlement proceeds to go to the organization.
"But there has to be some kind of payment because money was made off my work. Literacy is the proper place for it to go," she said.
Dailey admitted her books "Aspen Gold" and "Notorious" contain ideas and passages lifted from several of Roberts' novels.
The copying was discovered recently when Dailey got tripped up during online chats with readers.
"I can only apologize to Nora, whom I've considered a friend, and to my readers for any pain or embarrassment my conduct has caused," the 53-year-old author said in a statement from her home in Branson, Mo.
"I recently learned that my essentially random and nonpervasive acts of copying are attributable to a psychological problem that I never even suspected I had," Dailey said. "I have already begun treatment for the disorder and have been assured that, with treatment, this behavior can be prevented in the future."
The plagiarism took place in the early 1990s while Dailey was under professional and personal stress, in part from the cancer deaths of two brothers and the lung cancer surgery of her husband, the statement said.
Roberts said she is comparing other books by Dailey to determine the scope of the copying and is concerned about "bringing an end to this disturbing pattern of plagiarism in a way that best serves the interests and integrity of the writing community."
HarperCollins Publishers in New York agreed to discontinue sales of "Notorious," said Roberts' lawyer, David Hashmall.
It wasn't known how many copies of "Notorious" were sold. "Aspen Gold" was released four years ago and is no longer in print.
Dailey has written 93 books over two decades. Sales of her books, which have been sold in 98 countries and 19 languages, have surpassed 200 million copies.
Roberts, whose current best sellers are "Finding the Dream" and "Sanctuary," has published more than 100 novels and has 35 million in print.
Romance novels are a $1 billion-a-year industry. They account for more than 80 percent of the mass market fiction titles published each year, according to the Book Industry Group.