BECAUSE IT IS HARDER to tell what will sell than what has sold, the children's book trade plays it safe with "revivals." This holiday season is particularly ripe with sumptuously produced classics, newly illustrated. But because a new picture book can be expensive, few people can afford to be careless in choosing from the latest offerings for young people.

Lately the children's book business has shown little imagination. For example, there are two new editions of the Brothers Grimm's The Bremen-Town Musicians this season, one illustrated by the veteran Janiana Domanska, and translated by Elizabeth Shub, (Greenwillow. $7.95. Ages 4-8), another by the novice Ilse Plume (Doubleday. $8.95. Ages 4-8); and a third is promised from Donna Diamond in the spring. Neither of the current pair is the definitive version: Domanska's stylized forms are sometimes confused; and although Plume's pictures are certainly charming, their compositions generally lack dramatic tension. The Grimms also appear this season with Susan Jeffers' new illustrations for Hansel and Gretel (Dial, $9.95. Ages 5-9). But Jeffers does not seem the right artist for this story. Her tame pictures fail to comprehend the Grimms' dark tale of attempt infanticide and cannibalism. She also disregards certain details of her text; for example, her plump witch does not have "bony" hands but the mitts of a washerwoman.

Erik Blegvad could breathe new life into any old story, and his The Three Little Pigs (Margaret K. McElderry/Atheneum. $8.95. aAges 5-9) is the most irresistible picture book of the year. The Danish artist obviously had a good time illustrating the English folktale. His clear, clean ink drawings highlighted with soft, grainy color pencil, depict every nuance of the well-known story, and Blegvad has added a few witty details of his own: Perhaps parents will gasp at the sad fate of the second little pig, who ends up with an apple in his mouth, but children will only giggle.

Trina Schart Hyman shares Blegvad's ability to read beneath the surface of a narrative to reap new subtleties from a popular story. Although Peter Pan has been illustrated many times before (and usually dismally), Hyman has made the Jame M. Barrie novel her own in this edition (Scribners. $14.95. Ages 6-up) commemorating the 75th anniversary of the play's opening in New York. Unlike her predecessors, Hyman in her strong line drawings and full-color plates deals less with the fantasy and more with the relationships between the famous characters. Notably unorthodox is her Peter: No longer is he the pint-sized Robin Hood in Lincoln green but rather an enfant sauvage, a scruffy boy in a skimpy suit of leaves who does look like he could have fallen out of a pram and lived on some uncharted island among the fairies and pirates.

The Wind in the Willows, has also been frequently interpreted, and by such masters as Ernest H. Shepard and Arthur Rackham. Michael Hague has succeeded splendidly in the lavish new edition of the Kenneth Grahame classic (Ariel/Holt, Rinehart and Winston. $16.95. Ages 9-13). Grahame's novel has always seemed to be two books, the lives of Mole and Water Rat and the adventures of Mr. Toad; and appropriately Hague varies his style to distinguish the bucolic epsiodes of the first narrative from the farce of the second. Still a young artist, Hague is sometimes unsure in his line, clumsy in his composition; but these are minor flaws. So seductive are his dappled landscapes, so endearing his characterizations that with this ambitious Wind in the Willows Hague already must be recognized as a master.

Hague has also produced this season an edition of East of the Sun and West of the Moon (Harcourt Brace Jovanovich. $9.95; paperback, $3.95. All ages). It should not be confused with Mercer Mayer's East of the Sun and West of the Moon (Four Winds. $10.95. All ages), which is actually an original pastiche of various fairy tales, and illustrated with dramatic panoramas whose gelatinous colors are reminiscent of those of animated cartoon cells. Hague retells (with his wife, Kathleen) the Scandinavian folktale, but not as successfully as in his full-blooded Wind in the Willows. Although the individual pictures are handsome, they do not quite add up to a whole picture book. The volume seems a fragment of a larger work. This criticism can also be made of Chris Conover's technically expert The Little Humpbacked Horse, a Russian tale retold by Margaret Hodges (Farrar, Straus & Giroux. $9.95. Ages 3-up). Lamentably neigher Hague nor Conover were given the proper space in which to fully express his or her fantasy. Also both of these artists have fallen into the bad habit of either covering a character's face or having him turn to the side, so that the reader cannot experience what the character feels.

No such problems plague Elizabeth Cleaver's art for Petrouchka (Atheneum. $12.95. Ages 4-9), a picture-book retelling of the Stravinsky ballet about an enchanted puppet who dies for love. This Canadian artist has developed a deceptively simple method of composition -- brilliant collages of linocut figures, jointed like jumping-jacks, and set against brightly colored backdrops. But the technique is so flexible that the suite of pictures convincingly recreates the exuberance and drama of an actual performance. The accompanying text is slight, merely captions to the stunning art. Perhaps the best way to appreciate Cleaver's achievement is to study the book while listening to a recording of the famous music.

What is most remarkable about the best of these new editions is how easily their modern illustrators have slipped into the spirit of the old stories. Clearly these are books designed to be treasured in a family's library from generation to generation; and several of these volumes will likely prove in time to be the classic interpretation of a classic tale.