Janine, I did this with my fifth graders and it was FABULOUS!!!! We used iMovie on a mac but it would be fine in moviemaker3 I think. Students first completed some basic info about the book/theme/characters, etc., then I taught them how to find royalty free images. Then they were good to go. I also found a rubric online which I modified to fit the project. Email me at firstname.lastname@example.org if you'd like the link to see my students' trailers.
Also, the rubric can be found at www.rubistar.4teachers.org
It will say "go to a saved rubric" and type in this number:
Hi! I attended training with some librarians regarding book trailers?
Either of those programs will work. You could probably do more cool tricks with Windows Movie Maker, but I am only saying that because I less experience with Photostory then Windows Movie Maker.
My librarian used Animoto - but Animoto says users have to be 13yrs or older. Actually, they tout an Educator version, but they ask you to create a fake birthday for under-aged children.
HAVE GREAT FUN!!!!