When I was a child, we had a set of books that included 6-8 volumes. I don’t believe it was Childcraft, but something similar. The first volume was gray and blue, I believe. The illustrations were absolutely stunning. I remember many of the poems – Robert Louis Stevenson; one about digging in the sand at the beach; a diller, a dollar, a 10 o’clock scholar; two little kittens, one stormy night, began to quarrel and then to fight. There were also stories – Christmas at Hollow Tree Inn; one about fairies.
Maybe Book Trails compiled by Renee B. Stern? The 1928 set was 8 volumes with blue hardcovers.
Fitting this description is the series called “The Child’s World” in six volumes. Published in 1956, Chicago. The first volume called “Stories of Childhood” is gray and blue. the book has nursery rhymes, poems AND I just looked and it does have Christmas at Hollow Tree Inn.