The early Whole Language movement (going back to the late 70's-early 80's) did emphasize quality literature, or "real books," partly in response to some of the basal sludge on the market. However, current "balanced literacy" does *not* feature "quality literature" but rather, "leveled books" which are specifically written to correspond to the Fountas and Pinnell/Reading Recovery levels and to lend themselves to being "read" by the approaches encouraged, e.g. picture cues, syntax cues, looking at the first letter and "predicting" (guessing) the word, and so on. Usually these books, while very glossy and colorful -- and correspondingly costly -- are banal and vapid to the point of soporific.
While one criticism of more phonics-based reading schemes was that they didn't sound like authentic speech or written English ("Dan did run at the cab"), the current books have stilted language that is every bit as artificial as, and no more like authentic speech than, the Dick and Jane "Oh, oh, oh, look, LOOK,LOOK!" or "the fat cat sat on the mat."
You can see some free samples here:
At the higher levels, some are pretty good, especially the non-fiction. But at the earlier levels, they are no improvement over "A Pig Can Jig" and in fact are worse, because they promote guessing, inhibit development of decoding skills, and still offer no real content to the reader. Better beginner books are the 70's era SWRL Beginning Reading Program books, now public domain and downloadable here
Great children's literature can still be included in the "read aloud" component of the day. This is a must in the inclusion classroom -- many kids will be unable to read age-appropriate or challenging books, but can certainly understand them and gain a lot of vocabulary and background knowledge if the teacher reads excellent stories aloud. Not only fictional classics from The Wind in the Willows to Lassie Come Home, but also non-fiction pieces about science, history, biography. I found kids were fascinated by tales of unsolved mysteries (the Mary Celeste, the disappearance of Amelia Earhart), famous disasters (the Hindenberg, the Black Death, the Titanic), natural catastrophes (volcanoes, earthquakes, tsunamis) and these often sparked kids to do research and reading on their own. Sometimes participation in a class read-aloud gave a student with low literacy skills the opportunity to show superior reasoning and analysis.
Ideally we would get all students reading so that read-alouds would be for enrichment and extensions but I don't see that happening in the foreseeable future. "Balanced Literacy" will not meet the needs of those student who need explicit and systematic instruction (and this need is not much correlated with IQ or family background).