Edith Hamilton is the classicist's classic. Her Mythology book was a favorite of mine as a child. It reads like short stories and works well for kids who want a deeper understanding of Greek mythology. For ages 9 and up.
Haroun and the Sea of Stories by Salman Rushdie: Besides the fact that Mr. Rushdie is a great writer there are lessons and insights into the human spirit to be had in the pages of this artfully-crafted tale of the struggles of a storyteller who looses the ability to tell stories.