My niece is too old for this book now, but when she was about four, five, or six or so, she *loved* this book. This was one that stayed at Grandma's house, and was a bedtime story for when she spent the night there.
The story is fun, and the characters are lovable little guys. Like the Word World TV show, the creation of words is the theme presented here, and that is done in a way that engages and works for kids. The illustrations are bright and well done, too, and I really like how the animals have been created with letters.
Although my niece is now too old for this book, just the other day she informed me that there is no such thing as magic. I looked at her and said, "Well, doesn't *someone* sound just like Frog, and I think we all know what happened to him!" She stopped, looked at me, and just cracked up! Sheep's Magic Hat is still loved, and still lives on.