Authors, Writers, Publishers, and Book Readers
Kay is correct. If you're going with a traditional pub., they'll want to take care of it. If you're doing it on your own, I recommend CreateSpace as the medium. As for illustrators, check out guru.com. It's amazing how many talented people are out there.
Many paths to take. Looks like you have the option to create your own illustrations. Keep in mind, the more your publisher does the less you get in return ($).
My company http://MotherSpider.com offers 3 types of contracts to the clients we accept based on your budget. Most go with the low hourly payment during production with a 20% residual of all sales. The opposite spectrum of contracts and this is the case for just about all illustrators, you pay a huge fee to own the image out right. And that is for each image. Gets a bit costly for children's books.
We are a 1-stop company for all production, publishing, and marketing for books, so feel free to ask questions. Good luck on your book either way.