Fast Company has reviewed a kids' book for the iPad called The Fantastic Flying Books of Mr. Morris Lessmore. It's created by former designer for Pixar named William Joyce, and the trailer is fantastic:

The review allays some of my fears about the book. Especially this sentence: "...the interface design is so subtle it wasn't until I was about six pages in that I realized that every page of the app has some delightful feature embedded into it that you have to find for yourself." This is a problem we're going to have to confront sooner or later: Designers shouldn't make an e-book too much like a movie or a TV show, but they should clearly have a reason to make the e-book a digital experience. And an ideal e-book will warrant many re-readings; with a digital canvas, the story should be able to stretch and contract as much as a reader wants. This looks like a solid first step.

Plus: This book costs just $4.99. If other e-book makers keep to this price point, publishers aren't going to be able to convince anyone that "old fashioned e-books," which are basically trumped-up Word files, are worth $12.99.