I love hearing all of the suggestions and I'm glad to make a list to try out now and revisit later! So, please keep sharing your ideas!
One of my very best memories of school (and I LOVED school) was my fourth grade teacher reading _The Witches_ out loud to the class. I can't wait to read it to DD! But, we are definitely not there yet... I'll have to check out some of Dahl's other work. I think the only other thing I've read is _James and the Giant Peach_.
We actually read Winnie-the-Pooh a few months ago and DD enjoyed it. I tend to translate as I read so the language is never a problem. But, we've also been reading long stories from collected volumes from around the world for over a year and poems beginning when she was an infant so both her language and her attention span are up to many of these books posters have mentioned so far. (Our favorite poetry is actually A.A. Milne's _When We Were Very Young_ and _Now We are Six_, btw).
At the same time, she's very sensitive so we need sweet and fun stories with good characters-- not scary or sad ones. (Tell you the truth, my reading taste is similar even today ).
For what it's worth, we stopped with _My Father's Dragon_ after reading the first book and began P.L. Traver's _Mary Poppins_. She LOVES it. We spent our whole breakfast comparing the movie, the current Broadway production and the book. Really fun!
I'm going to pick up a copy of _The Hobbit_ this weekend and give it a pre-read. It would be so fun for me for sure! I'm also going to pick up _The Wind in the Willows_ because I have never read it...