The comment thread to the post is absolutely fascinating and populated by the usual suspects--Love You Forever, The Velveteen Rabbit, Where the Red Fern Grows.
On the other hand...there are elements to the story that disturbed me as a child. Edith dressing up in a slip, instead of her dress, to try on lipstick with Little Bear struck me as, well, odd. And, then when Mr. Bear spanks Edith for her misbehavior when, really, he had just moved in and taken over the apartment...I felt humiliated for her. (Part of this is due to the camera angle Wright uses: Edith's bottom faces outward with Mr. Bear's hand raised above ready to strike.)
And, yet, despite my reservations I adored this book.
A couple of years ago Jean Nathan wrote The Secret Life of the Lonely Doll: The Search for Dare Wright, a book I'm putting on my to-read list right now. You can read about it here in the New York Times archives.
This rambling post leads to a question (or two) for you all: Which children's books traumatized you as a child or which children's books confused you as a child?