Hands down, my favorite FANTASIES are those with small worlds, or toys that come to life, or characters that shrink.
I'm not sure how many times I re-read The Borrowers when I was a kid.
In high school, I met Archy and Mehitabel, the poetry-writing cockroach and his sidekick alley cat.
In the 80's I loved The Indian in the Cupboard series, though I probably wouldn't recommend it to kids these days. Too many negative stereotypes.
More recently, I have loved The Night Fairy and Masterpiece.
At a loss for other titles that fit this "genre," I turned to the collective brain of Twitter, and my Tweeps did not let me down! Check out this list we/they came up with:
Mrs. Frisby and the Rats of NIMH
The Cricket in Times Square
The Miraculous Journey of Edward Tulane
Hitty Her First Hundred Years
Toys Go Out
The Friendship Doll
The Castle in the Attic [Paperback]
Mistress Masham's Repose
Traction Man Is Here!
The Doll People
My mom and her coffee klatch came up with these classics:
Pinocchio (Little Golden Book)
Alice's Adventures in Wonderland and Through the Looking-Glass
Toy Story (yeah, it's a movie, but it's a perfect fit!)
Thomas the Tank Engine Story Collection (Thomas & Friends) (The Railway Series)
The Little Engine That Could (Little Letters)
And, then, of course, there's The Sixty-Eight Rooms Series. My current favoritest fantasy.
The Pirate's Coin: A Sixty-Eight Rooms Adventure
by Marianne Malone
illustrated by Greg Call
Random House Books for Young Readers (May 28, 2013)
In this book, Ruthie and Jack have to deal with that conundrum of time travel whereby if you change the past, you might erase yourself from the future/present. They also help a classmate's family clear the family name.