My 3.5 year-old loves Zin Zin A Violin the most. However we don't own it. We usually go to the library weekly and let him pick out two from the selection there. He usually picks some pretty good stuff. Henry and Mudge stories are also a favorite. HTH!
-Frog and Toad Are Friends
-the Magic Treehouse series (aimed at older kids, but I don't find it to be too scary and DS loves them, but may not be for all 3yos.)
-Freddy the Pig series (borrowed one so far from the library and it was a big hit)
Mine likes the Velveteen Rabbit. It has George Winston playing piano
Also the Magic Tree House and the Frances collection. BUT in Francess they talk about spanking. I use it as an opener to talk about things with my older DD.
Jim Weiss is an amazing storyteller. At 3, DS loved Uncle Wiggly and Tell Me a Story. http://greathall.com/storytelling.html
They were fantastic investments for us! (Amazon often sells them as well.)