The Hobbit is a great one for reading to kids. I also have very fond memories of being read the BFG as a kid by a family friend who did all the voices. Kipling's Just So Stories and the Jungle Book are also good. A great reader can really help make a book come to life.
Whatever their literary merit, many Golden Books are great fun to read aloud and engage the childeren to the extent they want to hear them over and over again. The Friendly Book is a great favourite, as is the Happy Man and His Dump Truck. The latter is now being read to the third generation. It's appeal is timeless.