Every child's library should have some nursery rhymes in it. I've found two beautiful but out-of-print books by famous illustrators that are a joy to look at -- A Pocket Full of Posies: A Merry Mother Goose by Marguerite de Angeli (author of The Door in the Wall, a wonderful children's book I'm looking forward to sharing with Edmund in a few years) and Kate Greenaway's Nursery Rhyme Classics.
Marguerite de Angeli's book has a variety of rhymes on one side of the page, and then a full-page illustration on the opposite side, with small pencil illustrations scattered throughout the text. Since there is not a picture for every rhyme, this one may be best for older toddlers who have a longer attention span and enjoy listening to meter and rhyme.
The Kate Greenaway book has a picture and a rhyme on every page. Babies will enjoy the shorter rhymes, even if it is being read upside down. :) If you are fond of her illustrations, I recommend seeking out this book! Then find a soft old quilt and spread out under the shade of a maple tree to enjoy reading time with your children.