Children's books are probably one of my favorite things on the face of the planet. I have six younger siblings, and I'm four years older than the next oldest. We've also all been homeschooled, and all but me are still at least a year from graduation, so I've gotten lots and lots of reading out-loud time in.

I'll add a few I haven't seen, and definitely enjoyed reading a lot of the ones already mentioned. (Little Bear! Frog and Toad! The Hobbit!)
Non-chapter favorites:
Miss Rumphius by Barbara Cooney is a delightful book for anyone, but may be especially enjoyed by little girls. It's delightfully illustrated, to boot. For those who haven't read, it's the story of a young girl who makes a simple list of things she will do in her life, and then chronicles the fulfillment of those things in a way that even the small will probably appreciate.
A Million Chameleons by James Young is a great rhyming story involving color, and it dares to pull in non-traditional colors (vermilion, anyone?). I have fond, fond memories of this book.
Jesse Bear, What Will You Wear? by Nancy White Carlstrom and Bruce Degen is a fun cardboard book. Also, in this same for-babies/toddlers group, and also by Bruce Degen,
Jamberry is a joy to read and a blast to look at.
Chapter favorites:
My Father's Dragon by Ruth Stiles Gannett and Ruth Chrisman Gannett. This was written by a daughter-in-law/mother-in-law team. I've never read any of the sequels, but the chapters are on the shorter side, the story is on the light side of grand adventures, and both the story and illustrations have stood up to multiple re-readings (to the same kids) in my house. A good "starter" chapter book, as a read-aloud. Also, despite the existence of follow-up books, it can stand alone just as well.
The Family Under the Bridge by Natalie Savage Carlson is a wonderful Paris story, and a simple chapter book. It might be a good story to introduce younger listeners to the concept of "homelessness" because it handles it so well, without romanticizing it. Having a home and a safe place are very important to the characters, but the younger characters make the subject not-too-traumatic for smaller ears.
The Story of Doctor Dolittle by Hugh Lofting. I'm not sure I need to say much else about this. :-D
Homer Price by Robert McCloskey. Every single time I read this book, I want donuts. Every. Single. Time. It doesn't even have to be the chapter in which they appear.
King of the Wind by Marguerite Henry. Quite possibly one of my favorite books ever. Perhaps not for the littlest, though, because they might not be able to handle, aside from length, the treatment of the horse and the boy alike in some spots.
Man. There are so many others that fit into these two groups, and for older kids who can read on their own and still enjoy listening anyway. So many. :-D I'll stop myself, though.