I *found* this website when I was wondering the exact same thing. Why are there only 45 Magic Treehouse books?! (Only 41 in paperback...) Here's the link to the thread I found: http://giftedissues.davidsongifted.org/BB/ubbthreads.php/topics/18268/1.html

Here's more discussion:
http://nicoleandmaggie.wordpress.com/2011/02/18/preschooler-chapter-books/ There are some great suggestions in the comments as well.

Magic and non-fiction have definitely been the way for us to go. He's also enjoyed Arnold Lobel. The Wizard of Oz and Magic School Bus have given us some traction. Right now he's all about science books. They really need to reprint Ruth Chew's books, but your library may have some.