I've been keeping up with Tiny Art Director for a while and am so pleased there's now a book available. Basically, the illustrator's tiny daughter has been giving him briefs and she then critiques the results. One of the recent posts has a great fairy tale theme... with added crocodiles.
There are many children's authors who produce work in some form of collaboration with their children. I've taught The Wolves in the Walls, the idea for which Neil Gaiman took from his daughter's dream. The illustrator, Dave McKean, included one of his son's toys, a pig puppet. And there are other works, including Winnie-the-Pooh, Alice's Adventures in Wonderland and Peter Pan, that were likewise composed in collaboration with children's play.
The impact of such collaboration is fascinating, but under explored. Often, particularly in the older examples, there is a taint of exploitation. Yet, contemporary examples show that such collaborations are likewise lively, engaging and productive.