Kate is the one reading the story. Since we are given the information 'Kate reads story', there's no doubt that Kate is the reader. Reading stories can be a solitary and fulfilling activity for Kate. She might choose stories based on her interests, like mystery, romance or adventure, and get immersed in the world created by the author.
I'm not sure which 'Dolly' specifically is reading a bedtime story. There could be many people or characters named Dolly. It might be a mother named Dolly in a family, or perhaps a fictional character named Dolly in a children's book who has the task of reading bedtime stories.
Since Elmo is often associated with children's education, when he reads a story, it usually has some educational value. It could be teaching kids about letters, numbers, colors, or important life lessons. So it's interesting not just for entertainment but also for learning.
It's hard to say for sure. Different genres and platforms have their own popular stories. But some classic novels like 'To Kill a Mockingbird' or modern fantasy series like 'A Song of Ice and Fire' have garnered a huge number of reads.