This book would be a PERFECT segway into teaching about diversity! This is the story about sneetches - some have stars on their bellies and some don't. This causes a divide between the two groups. I would read this aloud to my class because it is very long for a picture book and there are many made-up nonsense words that may confuse children if they are reading it alone. I could read it aloud to any grade level and I believe it could be easily understood, but if it were assigned a level for INDEPENDENT reading, I would categorize it as an M using Fountas & Pinnell's levels.
As an activity, I would incorporate some sort of diversity lesson. I may put the children into pairs to discuss how they are different, how they are similar, and how this makes them great friends! Perhaps a Venn Diagram would help facilitate learning and understanding of this concept.