I do a regular storytelling workshop at the Madison Children's Museum called Writer's Block – in it I produce brilliant stories with the help of my children attendees.
Generally how it works is that I'll show up with a prompt – "Monster Ballerinas," say, or "The Sandwich that Did not Want to Be Eaten." Then, with some gentle guidance, the children will tell me how the story goes.
They take home a pamphlet of their own illustrations, while I take home the story. I write it up and illustrate the stories myself and am planning to publish a collection of them! The first book will be called "The Three Chickens and Five Other Tales," but I'm hoping to do a series.
If you're interested in attending a workshop or scheduling one yourself, let me know!