I love this website that comes in English and Spanish. It has online stories and activities broken up into age levels, and then it also has a reading list.
Some of them use flash and are read out loud (and have choose your own adventure parts) and some of them are just pictures and the parents will need to read the stories.
Great stories, Disney quality illustrations.
This book website with activities is probably best for 3-5 year olds.
The Screen Actor’s Guild foundation has actors reading stories to kids out loud through the Internet.
The kids can choose their own adventures, but the parents have to read the words. For some of the places there are little games as well.
These stories are read out loud while you press the arrow key.
You can personalize the story by putting in your name.
A whole bunch of great reading activities with stories.
A whole list of Interactive stories to read online