By way of cynsations, I found Jennifer Mattson on Magic Realism at The Spectacle. Mattson talks about what they're calling "magic realism," though I've always heard it referred to as "magical realism." (Picking nits.)
In the Mattson interview we get some definition and examples and discussion of how this genre fits in with kidlit.
Another example of magical realism--Owl in Love by Patrice Kindl.
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