As a bookseller, I am going to say this: Write what you want. It'll have it's audience. The parents are very selective when choosing books for that age group, for all the reasons mentioned above. And you would be surprised by things I get asked for. For a ridiculous exaggeration of the questions I get, "Do you have a book about friendly snails? My child is afraid of snails, and I'd like her to see that snails are people, too." And the parents who have kids who are afraid of the dark love having books that explore that issue. The parents with children who easily develop new fears avoid those books.
And in a side note, I apparently helped my niece get over her fear of snakes by accident. I sent her a brightly colored, beautiful picture book that was illustrated by David Diaz for Christmas one year. There is a roadrunner who conquers a snake in it--and my niece found that very comforting. (If I'd known she was afraid of snakes, I never would have sent the book!)