Some nice sounding recomendations here – I'm going to try them.
My 8-yr old daughter seems to be completely immersed in "the Dragonfly Pool" by Eva Ibbotsen. I've no idea what it's about but she's dead to the world when she's reading that.
Alternatively, as a reading to them book, 'The Graveyard Book' by Neil Gaiman is going down particularly well at the moment.
My (9-yr old) son is absolutely hooked on the Percy Jackson books about a boy who is half human half god (the first one is called "The Lightning Thief") and apparently they cover many of the classics in a modern-day setting.
Hope this helps (bookmarks this thread for future inspiration)
Ben