This article is from the misc.writing Writing FAQ, by Wendy Chatley Green firstname.lastname@example.org with numerous contributions by others.
Children's picture books are normally assembled by
the publisher, who buys a manuscript, then assigns an artist
to create the drawings. Historically, most publishers have
strongly preferred *not* to receive manuscripts with
illustrations; the feeling has been that it was too
difficult to accept one part of the package and reject the
other. Author-illustrators generally earned their spurs by
illustrating the works of others, and were then allowed to
create their own books. Some publishers are beginning to
accept (but not prefer) complete packages; check *Writer's
Market* to find suitable candidates.
If you are submitting an unillustrated manuscript
for a picture book, you should generally not attempt to
indicate page breaks, double-page spreads, etc., or give
detailed illustration suggestions, as these are the book
designer's and illustrator's domain. Anything that you want
to appear in the picture should be part of the text. One
obvious exception to this rule is irony: if the text reads
"Irene's room was always tidy", you're allowed to insert a
note like "(Illustrator: the room is actually a pit.)"
As always, you should read many different picture
books to get a feeling for the strengths and limitations of
the format. Bear in mind that picture books are almost
invariably 32 or 48 pages long, including title page and
other front matter.