Dreamlike tale with exquisite illustrations; The Wreck of the Zephyr, by Chris Van Allsburg. Boston: Houghton Mifflin. 32 pp.

Vast ocean and illimitable sky set the stage for this unusual children's book by 1982 Caldecott Award winner Chris Van Allsburg. A boy encounters strange events when he and his sailboat, the Zephyr, become lost in a storm. Washed ashore on an island, he finds it inhabited by people who sail their boats not only on water but through the sky. Instantly, he becomes intrigued - and persists until he, too, learns this art of skyward flight.

Soon his Zephyr, white sails billowing in the dark night, is gliding through the clouds and heading for the stars. ''Surely,'' thinks the boy, ''the men of the island never dared fly so high.'' He sails yet further, soaring over his village, where he plans to ring the Zephyr's bell so that ''everyone would see him and know that he was the greatest sailor.'' But as one might guess, his conceited plan topples.

Van Allsburg has created a dreamlike story that mixes fantasy with reality. Yet this kind of fantasy deviates sharply from the type more commonly found: children's books featuring such things as magic crayon worlds, talking cows, bicycling monkeys, and tea-partying animals. ''The Wreck of the Zephyr'' is far more sophisticated and somewhat mystical in content.

While the story itself falls short in plausibility, Van Allsburg's full-color pastel paintings create their own exquisite story. The soft delineation of sea, sky, and sailboat gives the book an airy, timeless quality. (Ages 7 to 10.)