Three? children are gifted (by a scientist /older man?) magical thinking caps, which increase their capacity to imagine. They use these hats to create/connect to and explore a magical world. I remember the antagonist wanting these hats so that they can free themselves and enter the other world. The children are careful to only go to the land together for safety. The antagonist has an agent that can move in between the worlds, a Slinky/Shadow/Sneaky Cat. This cat convinces the girl to come back alone with him to it’s yarn house. The other two? children go on a rescue mission with the scientist? who has his own hat, but because he is an adult is not able to use is as well as the children.

I read this book with my elementary school class around the time when we transitioned off of picture books to shorter novels, so I would expect this book to either be the latter, or one of those children’s novels with some pictures. It would have been published no later that 1998.

I appreciate any and all help! I will mail a check to you all tomorrow.